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The 5 Most Important Headlines in Crypto of September 2021

[00:00:00] Didier: Hello, we meet again to review important news that I have selected effecting crypto that came out in the month of September of 2021 to do this. I am joined by founder and CEO of big blockchain innovation group. And by Alex Poltrack co-founder of several companies, most recently huddling essay. Good afternoon, Morrow.

[00:00:28] Mauro: Good afternoon, Alex.

[00:00:35] Alex: Oh, sorry. I was muted. Good afternoon, Alex. Okay.

[00:00:42] Didier: So today I have selected headlines relating to three subjects, regulation, lightening network, and NFTs. So regulation, let's start with those headlines. First, these headlines all point in the direction of increasing regulation in many different countries, concerning Bitcoin in all forms of defy, [00:01:00] all the indications we have.

[00:01:02] Indicate that the major firms see this regulation coming and are trying to prepare themselves by hiring on their board. Ex regulators and lawyers. We spoke in the past of Binance trying to make themselves more appealing to a regulator. However, we have commented that they have in the past, always tested the limits of what is admissible.

[00:01:22] They have said now that they are looking to do an IPO in the U S. Some jurisdictions are looking to develop clear regulation quickly like Switzerland, Singapore, and certain states in the United States and others change their stance. Often like in China, more specifically, China has been, uh, all of crypto and Bitcoin for the fifth time.

[00:01:42] I suppose that shows that the first four times that. However China only had to ban Google and Facebook once. So I suppose that tells you something. The first time China banned Bitcoin was in 2014, then 2017, then 2019 and 2020. The price initially went down a few [00:02:00] percent in the next 30 days and was higher a much higher 90 days later.

[00:02:04] So any comments first on China gentlemen,

[00:02:07] Mauro: um, working with some of the people which are based in the region, Who have decided to go and set up their companies, crypto companies in Europe and also in Switzerland. So we are actively doing that, setting up one of them, you know, from the region, it kind of helps the points, uh, that, uh, The companies know that more, it's going to be more difficult to business in China, but I also can see that there are ways there's a lot of facilitation around China to still be the gateway for Chinese people to access crypto and the services which come with.

[00:02:49] Alex: Alex. So on my side, they always see that deepen is regulated. It's fully regulated Bates code. So what these [00:03:00] country like legal countries, jurisdictions, um, regulation are doing is to bring, uh, some insurance to the, to the users. So now China, oh, sorry. Before, before China. Uh, people on the board clearly shows that, uh, it's about like bringing some, uh, old school credibility.

[00:03:26] So hire people on the board. They are not the people who will be writing any code or try to bring some regulations like in force, by technology and new regulation into Bitcoin or device. So it's clearly she choked. Sorry for, um, so now about the jurisdiction clearly, uh, sorry, uh, jurisdiction quickly changing in the regulation like Switzerland, they don't agree with relation and I [00:04:00] think it's a good.

[00:04:01] That we take time here to see how this new technology may be viewed from the legal point. And do we even need to change the regulation or the current regulations feeds well with, with this new phenomenon? So, yeah, I think the strong point of Switzerland is precisely the opposite of being quick on these Frances very fast is doing a lot of new licenses, laws and stuff.

[00:04:29] So. China, you, you haven't covered, um, uh, here, the, the recent, uh, power outage in China. Have you heard about this? No. Like all, all the regions in China have a lot of our outages, uh, recently. And apparently it's like a systematic and, uh, all regions in China. And they spoke about these with a few [00:05:00] people trying to understand the, uh, like even in a minor way, it can be triggered by a.

[00:05:06] The miners leaving and changing the equilibrium of the greed and people are divided here. Some people think that they may have participated to create disequilibrium. Uh, some people think that now it just helps to keep the situation controllable for. Months more, but clearly they have problems with the power grid.

[00:05:33] They had to shut down big factories. And now even apple has started to have like supply chain problems because of, uh, because of that. So it's still not clear. I'm still divided on this question and yeah. Banning difficult. And for the fifth time, I think it's even more than five. Yeah. I don't remember who it was, but something.

[00:05:55] Uh, tweeted that you, you can ban something only [00:06:00] once, every next time you just show that they didn't work. Exactly. Have you tried to make any payments to any Chinese counterparties since this ban? This would definitely work

[00:06:14] and doesn't know where you are. So it's regulated only by its code and the code safe. The transaction is valid from Bitcoins, from the perspective of the code of the rules of the network, the transaction is valid or invalid, and there is nothing in this code. The, about the jurisdiction. Uh, any other criteria about the persons using the, the Bitcoin net?

[00:06:42] Mauro: Good, quickly, quickly on these points. The other points, I only mentioned the ones from China, so first of all, so I think yes, more regulation is coming. Uh, I think, you know, especially defy will be, I think looked at very carefully, I think, because it is, uh, all regulated. Nobody knows yet, or not many people know how [00:07:00] it works.

[00:07:00] So I think that is probably not preventable. Uh, also the other point is, you know, regarding design pills and it just kind of went through our mind to all the Coinbase and all these big crypto companies now doing IPO's, eh, you know, kind of, you know, one way they want to be decentralized, not dependent on any of the financial industry.

[00:07:21] And on the other hand, the first thing they do after they're successful, basically going back from the two hands into the hands of the financial engine. So, you know, all that's good that they do it. I don't have a problem with it. It's just kind of something to think about, right? This is a good step direction or not exactly.

[00:07:38] I don't have the problem with that either, but it clearly shows that once our striving for decentralization and other are fully central, Uh, and I don't have a problem with that. If they clearly advertise themselves as a centralized platform like Coinbase, for example, they are not pretending to be any defy [00:08:00] or whatever, Alex, even though they are coming out of the ideology.

[00:08:04] You know, obviously it has the purpose of the centralized has the purpose of kind of like saying, I know they are not, I'm just saying, you know, it kind of takes a little sometimes to, to swap back into the world, which we know.

[00:08:20] Alex: Yeah. The people who are there by ideology and some people who are there for buy opportunities and because they can.

[00:08:29] Tons of money out of it.

[00:08:30] Didier: So obviously, I mean, for example, there are lots of so-called defy platforms who say they're they're regulated, or they got a green light from the Finmark for some regulators. So basically that means their permission. So as soon as your permission. You can be censored because somebody can take away your permission.

[00:08:47] So we're no longer censorship resistant really, which is sort of the point of defy in fact, but they want to be, they want to have the, the approval of a regulator because that's what institutional and ma makes [00:09:00] institutional investors feel comfortable. And that's, what's going to bring them a lot of money faster, basically.

[00:09:04] Uh, most people don't really understand crypto and so they want to be, uh, feel secure that a regulators, that it was okay. And. Then you can have a link with the banks, or we're not really going to trade with you if you're not regulated by anybody. So of course there's a huge element of opportunism there and, and there's a huge element of, well, yeah.

[00:09:22] Um, you're not permissionless you're permissioned, but, uh, so therefore your censorship you're sensible. It's no longer censorship resistance. Yeah. Yeah.

[00:09:32] Alex: But you know, also Didier, uh, in some countries, regulators or. Doing a good job. Like, uh, mostly at least mostly they are trying to protect, uh, people, citizen from, uh, fraud, from being scammed.

[00:09:49] So in this sense, like, for example, in Switzerland, the few, if you want to. Build an exchange. You need a banking license. [00:10:00]

[00:10:00] Didier: Yeah. I mean, I know people say that, but I always have a tremendous problem with this. For me, it's a tremendous contradiction because we're allowed, you're allowed to own a casino. You're allowed to run a casino in which you tell people upfront, the probability is you're going to lose money.

[00:10:13] Right? I mean, so protect people against their own stupidity I mean, I'm not for protecting people against

[00:10:18] Alex: it's trade-offs, it's, trade-offs at least, uh, the goal of this regulator. To try to protect people and not to scan them. There are some regulators that, that they're. Goal is to, to like it's centralized for basically, for example, in the Russia or in some of the post-Soviet countries, let me run off a few headlines for you, which basically confirmed the type of things we've just said.

[00:10:46] Didier: And you'll see if you want to react to this and if not, all, we'll move on. So some of the headlines I chose was fed chair. Powell says he has no intention of branding crypto, but on the other hand, uh, before the Senate, uh, Gensler. [00:11:00] Uh, the chairman of, I think if the sec will argue that many crypto trading platforms need to register with the sec custodial crypto lending and staking products take on all the indices of securities, according to Gensler as well.

[00:11:15] MasterCard acquire a crypto tracing for, from cipher trace. And this also I found interesting was crypto dad, uh, John Carlo, who used to be a regulator to quit blog FI's board after four months. And I was wondering if either you had maybe Mauro had any insight into block five that I don't have because John Carlo was a regulator.

[00:11:36] I think it was the CFTC. He was taken onto Blockfi board. And obviously he left after four months and blocked by seems to be having some problems with, um, I forgot which regulator as well.

[00:11:47] Mauro: So right now, as soon as Jersey, I don't have deep, deep knowledge, but, you know, we were talking to them for, so for a client to start business, uh, you know, currently there are, I would say, you know, not pushing, pushing, pushing.

[00:11:59] [00:12:00] So I think there are now busy to get out of. Situation or, or clarified the situation. Maybe it's good because you know, if it's has to be regulated lending, which obviously usually is for acting in Switzerland, you need to have a bank license to, to do lending. So if this obviously will force both fight either to survive and get this done.

[00:12:23] And then I think it's going to be probably one of the NGO. One regulated crypto lending company, right. Or, you know, maybe, I dunno, I don't, I don't expect that they're going to shut them down, but I just, I'm probably as you as well, uh, TTA, we got the emails that they, uh, the New Jersey, whatever government hard there has given them more time until end of December.

[00:12:49] To kind of start talking about the case. So there's some, you know, they obviously raggy most are clients that nothing's going to happen and so forth, which I think is probably the [00:13:00] case, but has to be probably sorted out with the New Jersey state. And then the other point that yes, nobody will probably ban crypto, but, um, they will ban, um, the service providers or they will, uh, you know, increase requirements for the service providers that will increase, uh, on and offboarding of, uh, crypto into field.

[00:13:25] So this is kind of what was. Going to make it much more embedded into the today's financial industry, uh, compliance requirements and so forth.

[00:13:35] Didier: So, okay. Moving on a bit to regulation and defy because there was one news that I thought it was was interesting. Regulators investigate. Okay. They're investing uni swap, but Massari founder.

[00:13:46] Who's Ryan Silkis announces Senate run as the sec shadow hangs over main net conference. Basically his company Massaro. It's the hosting a conference called main net. As an announced that he's [00:14:00] running for Senate because he tweeted. If you were wondering why I actually decided to run to Senate, it was one, one of these fuckers from the sec, he came to my event, didn't buy a ticket and served one of the speakers.

[00:14:12] They subpoenaed. But then we don't know who that speaker was and that's not been made.

[00:14:18] Alex: Uh, I meet in popcorn, observing, uh, these, uh, uh, circus because, you know, and you need swap labs case, and the few cases that you you described before speaking defy block Phi and all this kind of stuff. For me, there is a big difference between a decentralized network and the company providing a service.

[00:14:42] That, uh, have some specific risks for the, for the customers. And this is where the regulator. Come to the company and try to regulate it, which is normal. I mean, you can imagine that we're going to go to a list where these real Dexis, if they're [00:15:00] really are de-centralized, we'll be still only willing to trade with white listed addresses and that will make them regulated because what you say.

[00:15:08] So the units for the Uniswap case is really interesting and we already discussed it, I believe last month, uh, Eunice. Centralized parts and de-centralized parts or let's say for now has a lot of centralized interfaces that are for convenience are only used in a very centralized way. So Uniswap contract is on the Ethereum blockchain and this among the most decentralized smart contracts on the theorem blockchain, but the interface to access it is currently.

[00:15:45] Like it's mostly accessed through the website of the DNS domain name, uh, address, uh, that belongs to this, uh, entity legal entity Uniswap labs. So [00:16:00] obviously if like prevent least in fro for a Dylan. They, they should do it. That's the point of the regulator. And if they want their technology, if they want to pretend that it's fully decentralized well, they need to do the effort to make it convenient enough to use in a decentralized way.

[00:16:21] And the day when everybody will run their own full node access uni swap in a fully decentralized way without a. Intermediary any technical or financial intermediary, the regulator will have no say very far from that day because you have to be running a full Ethereum node. And most people are not going to do that at least.

[00:16:43] Exactly. But that's, that's the boundaries between centralization and decentralization. Nobody's said this centralization is easy, convenient to use and blah, blah, blah. It's it's all difficult. And you have to have your incentive. To use it, meaning you're someone [00:17:00] is trying to sensor you. Someone is trying to prevent you doing something to seize your money.

[00:17:06] You need some strong, strong incentives to go that path.

[00:17:10] Didier: Um, because meanwhile in Switzerland and Switzerland, the Swiss market, a watchdogFINMA approved the first crypto asset trading fund. I think for Seba bank,

[00:17:21] Mauro: actually, no only it's actually a trip to finance, launching. And I think, uh, I think they were collaborating with Seba.

[00:17:29] You know, obviously this is very interesting for me because as you know, Deutsche Boerse had just bought the majority stake of crypto finance. Uh, which means obviously now the, you know, the exchanges and say, pause, you know, group to finance are now obviously starting to ramp up, uh, their services and products.

[00:17:53] They promote. In Switzerland, but also probably internationally because, you know, Sebahas a lot of, uh, [00:18:00] uh, or is it, I think Asian clients, but also middle east clients. So I think this is obviously poorly regulated, right as well. Uh, it is, uh, you know, it's the only for qualified investors, which is means you have to, you can only, uh, you can invest, but you have to invest a hundred thousand.

[00:18:18] So I think this is significant, let's say for the financial industry in Switzerland, right. Uh, I can tell you a client of mine have called me and said, Hey, have you seen this? And, uh, you know, can you look into this? So, you know, all the banks and elders are interested, um, you know, to obviously potentially offer that as well to their clients since it's fully regulate.

[00:18:41] And to backing is by, let's say established, I would say, uh, banking, um, mine, uh, providers on, again,

[00:18:50] Didier: let's move back a little bit to decentralization and Twitter, because as you might know that, um, Jack Dorothy has said that he wants to make Twitter a de-centralized company. And [00:19:00] so I don't know how you make a centralized company, a decentralized company, but that at least the initiative is quite good.

[00:19:07] In fact, when I, on my last podcast with Henry Picarella from streamer, I asked him the question. He said, he thinks that Jack Dorsey knows how he's going to do it, but he's not revealing too much. But one of the news headlines this month was that. Twitter taps crypto developer to lead decentralized social media initiative called the blue sky.

[00:19:28] So blue sky, the decentralized social media initiative unveiled by Twitter CEO, Jack Dorsey at the end of 2019 as a project lead, according to. According to a Monday announcement, Jack Graber, a former software engineer from Z cash and skew chain and the founder of the social events startup happening will spearhead the effort.

[00:19:51] So, yeah. Alex, any comments there? Do you think,

[00:19:54] Alex: first of all, I think you don't decentralize something that was centralized. I think it's [00:20:00] almost impossible unless some really extreme cases. So as I told you need. Very strong incentives to go the decentralized path. Like someone is censoring you. So Twitter is a good example and they may have some incentives to do so because.

[00:20:20] Like the political events with, uh, Trump's Twitter account. That was a blocked while he was an acting president. Now he tried to attack them in court to force them to unlock his, uh, his account again, uh, all these companies like Twitter, Facebook, all the big social medias. Came out to having some internal courts, uh, to decide on these cases so that they don't need to ask, uh, the CEO for every single case.

[00:20:54] And obviously it became political and the scores started to get people [00:21:00] appointed by Trump or by the politicians. And so. Th this sensitization may make sense for them in this sense, in the sense that, uh, they start to be so big and so significant that the governments try to impose stuff on them. You have to understand that economically, if you are really distanced realized you are not getting the profit, the participants of the decentralized network, get the profits.

[00:21:31] I don't know where, uh, like in. Which direction Jack Dorsey will balance these because. The more decentralized. It is the less revenue they are getting from the service. Like in Bitcoin, there is no one single company or a person who gets most of the benefits from Bitcoin.

[00:21:53] Didier: That's a good point. Okay. So let's, uh, continuing a little bit down that path.

[00:21:58] Twitter is making two [00:22:00] major updates that will make cryptocurrency into an integral part to its product with, with more likely to. Tipping on Twitter is expanding globally today to everyone, an apple iOS, and they will, will now be an option to tip in Bitcoin. Second Twitter is going to create a way for its users to authenticate the fact that they own the NST that they use as, as their profile picture.

[00:22:25] Okay. It goes down this path of tipping with Bitcoin, which will lead us a little bit into lightning network in a second, but, uh, you know, looking at, uh,

[00:22:34] Mauro: remember that interview. With Dorsey and Elon Musk. And that's why he announced that he would start using offer a tool to use. Pay or do something with, with proof, the big points, or he's now slipped, fulfilling his promise, which is good.

[00:22:52] So I think it's, you know, I like it, you know, always admired at my, I always thought it was good that Wechat very [00:23:00] quickly, uh, introduce, integrated payment services into their chat system. So I would think every social media communication, uh, software or tools we use should have something like that. You know, it's, it's almost like for every online service you needed anyway for one or the other way.

[00:23:22] So it will be available to be like a plugin for everything.

[00:23:25] Alex: I am not as much optimistic as you Mauro on, on this one. So Wechat is a good example of that. It's a social scoring system. It's a surveillance system. It's not like a tipping. Uh, this is a social scoring system. Is that when you're saying, uh, yeah, we chat.

[00:23:50] The way they implemented payments. And in fact, it's, it's even worse. Like the, in Switzerland, it wouldn't be legal to do it the way [00:24:00] they have done it because it's a custodial lightning for quality. So you have several aspects here. First of all, they keep the money for their users. Then they also have access to all the payments.

[00:24:15] They have a view on all the payments. They can obviously sensor them. They are legally responsible for, uh, for example, lighting payments to, um, the Twitter account of some, uh, recognize the terrorist or whatever. Uh, I, I'm not sure how. How good is that it's certainly bringing attention to the Bitcoin network to lightning network, but I'm not sure it's all positive developments

[00:24:44] Mauro: For me obviously Alex will probably point out the right points, why we should be careful in using it right. And what they do with it and the power they have on it. I'm looking at more from a convenience point of view [00:25:00] as a user, right. Which. Yes. I want to be able to, to, to, to use payments everywhere. Right. And to kind of whatever a donation, pay something.

[00:25:13] The, the thoughts and the strategy of having payment services in social media and many, if not all other services we use on digital. Um, I think I'm very good with that, but, um, I'm fully agree with you clearly the rules and just, you know, the security and, you know, the country specific regulations have to be, uh, attacked and, you know, obviously we don't.

[00:25:37] Risk that the users has been to be screwed.

[00:25:41] Didier: Alex were you were referring there to, to Twitter, to we chat that they have a lightning channel and they oversee everybody who using their network.

[00:25:48] Alex: Uh, no, no, no. To Twitter, Twitter, which is using their own. Yeah, because they don't lose lightning and they don't get Bitcoin from what I understand.

[00:25:57] Didier: Okay. Yeah. So basically your thing, the [00:26:00] implementation of, of lightening and payments on Twitter, wouldn't be at all decentralized. That's the new project, Alex, maybe that's the blue sky check, maybe, maybe, but you know, uh,

[00:26:13] Alex: Bitcoin, uh, Bitcoin is difficult to operate for banks in many. Uh, in many aspects, but a lightning network for example, is super convenient for banks and they should jump on it and provide the services.

[00:26:32] For example, as Swiss bank, you can provide legally very convenient and easy to use services on top of lightning. And because you're dying to provide all these guarantees, it's fine. It's perfectly legal in Switzerland and it would be really fast, like instant payment and a very low fees, et cetera. Okay.

[00:26:53] Didier: That's very good Alex, at the lead into the next subject, because we were going to talk about lightning network. So Alex, can you give quickly a definition [00:27:00] of lightening network?

[00:27:01] Alex: Well, uh, I will try to do on a technical, uh, Uh, in a technical way, and then you can maybe rephrase. So in, uh, technically speaking, uh, lighting network is a road network of payment channels.

[00:27:19] It's routed in a w in onion routing. So every, uh, node only knows who sent the packet and, uh, to whom he will be relaying the packet, but doesn't know the source of payment nor the destination of the. And these payment channels they're based on, um, time logged, hashtag blocked, uh, multisignature wallets.

[00:27:44] And then you have these payment channels where you can lock and then move liquidity without being fees on the, without doing transactions on the main network of people. So it's a second layer on top of [00:28:00] Bitcoin. It's a second layer of payment solution on top of Bitcoin. So you don't have to go on the Bitcoin main chain and, and, uh, wait 10 minutes for each block and, and, uh, and you can make a lot more payments.

[00:28:12] Didier: So basically you open a channel with somebody else. And you can make instantaneous payments in Bitcoin for basically less than 1 cent for, uh, with that other person. So it permits so

[00:28:27] Alex: first before doing the payment, you need to lock some liquidity in and just be careful with the less than 1 cent because, uh, on lightning network fees are like in, on Bitcoin, on chain.

[00:28:40] When you pay, you pay per. Uh, data stored on the blockchain. So it's independent of the amount transferred. You may transfer one CHF and B once your chefing fee or transfer a billion and be one CHF in feet. But on the lading that work, the fees [00:29:00] are in percentage of the amount transferred. So if you transfer a substantial amount, you may be being way more than if you sense that.

[00:29:09] Even if you see each other, it's a percentage of the amount transferred.

[00:29:14] Mauro: So, so in effect, if I understand this correctly, it's, it's a side chain, right. Which is connected.

[00:29:21] Alex: No, it's also, it's not a chain, it's a ball and there is no, uh, yeah. And the, the data is not stored as in a chain of blocks. So it's, uh, it doesn't have the limitation of a block.

[00:29:39] Mauro: Okay, so, but is it the construction? Is it like a wallet? Let's say, okay. So I, and Didier do you have a wallet together, right? Uh, which we can, or two, one or two, whatever it is. And then we transact these, um, payments on the truck between these two wallets or one wallet, [00:30:00] and then every, whatever it's been, obviously right down to the main chain, the state.

[00:30:07] Alex: Uh, yes. So the idea is that, uh, okay. Let's, let's simplify it. Let's say that you have a bank, a very advanced bank. Both of you who provides you a lightening, uh, wallet within the. Your banking system, for example. So they handle the channels, the liquidity, they handle all of these for you. And you're only doing lightning network payments.

[00:30:32] So you pay a small percentage of the amount transferred every time the payments are instantly. How do you say immediate instantaneous? Thanks. You never see anything about the Bitcoin blockchain. You don't have to. They handle the liquidity for you. Okay. And the channels. So if you go back and don't want to have a bank, if you want to be your own bank to do it [00:31:00] yourself, like the most, uh, technical and the master self sovereign way would be to run a Bitcoin full.

[00:31:10] To run a Bitcoin wallet than to have a lightning node and the lightning wallet. And then you, you create the channel yourself with at least one, one channel, at least one counter party, and you lock some of your Bitcoin inside this channel, and this is the liquidity that you can now send to. Anyone through the lightning network and it will be rotated through these channels that you have opened with someone and through the sound one eight.

[00:31:42] Transfer liquidity to him. He will transfer the liquidity to someone else, et cetera. And once you spend some of your liquidity through the lightning network, now you can receive liquidity because the channel owns you some back. Well, you have [00:32:00] liquidity on both sides. And at some point when you have done enough transactions and you need these Bitcoins, this liquidity for something else, then you may close the channel.

[00:32:12] And it will be. So the whole, I dunno, maybe 1000 transactions that you have made during this time on the Bitcoin network, they will be reflected by two transactions, opening a channel and closing the channel. So it's very technical and lighting is very technical. And this is where I think that banks have to may provide the service.

[00:32:36] A convenient service, uh, something like Twitter is doing that, uh, without like a good legal, uh, these, okay.

[00:32:46] Mauro: So, so that is interesting because Alex, I think what you're saying is you creating now service opportunity for the traditional banks in this scenario. Is that what. I think there is [00:33:00] some service before it gets a simple, so maybe, maybe you heard about, uh, open source software called BTC based server.

[00:33:11] Alex: It's a S it's a software open source that any merchant can install to, to accept between payments. And for example, you can install it at, um, for maniac in any, uh, internet service. Uh, internet service provider. Yeah. Yeah. And it will, uh, accept Bitcoin payments for you and in a non-custodial way, meaning that this internet server will not have your private keys and you can do it because it's Bitcoin because the, the wallet can be the wallet itself of the merchant can be completely offline, cold storage.

[00:33:55] And only the public address is, uh, in the internet [00:34:00] shop. Okay. But we've lightning, it's slightly different. Lightning node has to be always online with its private key and monitor transactions and do stuff. So. Uh, it's not possible for example, to provide the service in a non-custodial way.

[00:34:20] Didier: So for the people who like Bitcoin, this is one of the main scaling solutions to make it a lot faster and a lot cheaper to make payments.

[00:34:28] And if you like, maybe in 2017, when there was this famous split between Bitcoin cash and Bitcoin classic Bitcoin. Uh, Bitcoin cash or that one of their arguments was we're going to scale by doubling the block size and true Bitcoiners also thought, well, that's only just going to double the block size.

[00:34:45] That's not a real scaling solution. And they, what they thought would be the real scaling solution would be lightening because you're using Bitcoin and you're using the security protocols of Bitcoin, basically a multisignature contract between two parties to open a channel, [00:35:00]

[00:35:00] Alex: the ideal case. But this is the difference between.

[00:35:04] You handling all the difficulty of opening channels, closing channels, handling the liquidity and all that stuff. Or you take the trade-offs to outsource some of that work, for example, to Twitter

[00:35:19] Didier: or to a lightening service provider, which a lightening service provider would be a little bit like, like an internet service provider.

[00:35:25] Alex: Well, in internet service provider with a banking license in Switzerland.

[00:35:31] Didier: Yeah. Or the other analogy I use it's a little bit like a, your, your credit card. You open one relationship with your credit card company and your credit card company already has a relationship with every single merchant. So you don't have to go open a channel with every single person.

[00:35:47] And the advantage is you. Okay. And it's like paying your bills once at the end of the month. So you open a channel, that's one payment on the Bitcoin main chain. And at the end of the month, maybe you might close that channel. But in fact, there's no need to close that channel and [00:36:00] closing the channel. It had an operation on the main chain, but during the month, maybe you made 10,000 different payments to 10,000 different merchants.

[00:36:08] And those do not appear on the main chain. Basically anonymous. So that's the main advantage of lightning network and I'm of the opinion that the lightning network is probably the most underrated thing in Bitcoin today because it will permit many different, uh, business models that don't really exist right now.

[00:36:29] So that was a little bit the point of lightening network. And one of the news I wanted to point out this month was there was an article by a fellow named Kevin Rooke. Who says that and, um, lightening is bigger than you think. Uh, last time I looked there were apparently 2,100 BTC locked up enlightening channels.

[00:36:47] That might seem small, but we need to make a few points here. Payments are enlightening on the lightning network or private by design. Well, anyone can see the capacity of any advertised lightning [00:37:00] network channel. Nobody knows the exact balance of liquidity or the volume of payments being routed to the channels.

[00:37:07] This is a privacy protecting feature for users, and it makes the job of analyzing payment volume across the network. Almost impossible. By default analysts are forced to track the growth of lightning network using proxies like public node capacity. Despite the fact that it tells nothing about the actual payment volumes while figuring out exact payment volumes volume figures may be in an impossible task.

[00:37:34] There are clues and anecdotes we can use to piece together estimate. Hinting at the scale of the 19 network payment today, last week, lightning network markets shared that they have done $200 million of volume on their platforms since March, 2020 Bitterroot and Australian Bitcoin exchange that offers customers the ability to deposit and withdrawal via lightning network.

[00:37:59] [00:38:00] They recently shared that in the nine months since their life. Integration has been live. They have done more than $54 million of lightening network payment. If applications like lightening network markets in Bitterroot are doing 50 to 200 million in payments in volume. It's a safe bet that the annual payment volume across the entire net lightening network as measured in billions or tens of billions of dollars.

[00:38:25] But I think volume on. On lightning network. I saw a number that it increased about six fold in the last five or six months. So with a little bit, my question is, do you think lightning network can be regulated?

[00:38:37] Alex: Way we more than Bitcoin and we more than most of the defy for sure. And that will tell you why, but first metrics on lightning network are terrible and they are heavily, heavily, heavily underestimated.

[00:38:54] Uh, the numbers on the lightning network are heavily underestimated because [00:39:00] it's kind of the best that we can do. We have some overview of the network, like the liquidity locked and again, on the advertised channels, many channels are not advertised. There is a strong incentive to advertise them so that others wrote their payments through your channel so that you can.

[00:39:20] earn Satoshi is a four wrote in their payments, but, uh, you may also have some private channel between some companies and that are not advertised at all. And it's only moving liquidity between these companies. So, uh, already the, the metric of how many phones are locked is a weak metric. And then you don't know anything about the velocity of the money and if the no.

[00:39:49] Uh, like the channels have having large liquidity have a very high velocity. The amounts are like multiplied. [00:40:00] Maybe these 20, uh, 2,100 Bitcoins are traveling back and forward. Uh, like thousands of times per day, nobody can. So that's, uh, that's about the, the metrics. Oh, uh, one more thing about the metrics about, uh, light Ellen markets, lightning network markets, and, uh, deter Ru uh, the metrics they provide.

[00:40:27] It's a company that provides some metrics and you have to trust them. Uh, it's not the metrics that, uh, as on Bitcoin comes with a cryptographic proof. Th those metrics have to be views the as like untrusted sources now about the regulation, obviously it's much easier to regulate when, uh, your, uh, a centralized party facilitating some technical and financial, uh, aspects for [00:41:00] your users.

[00:41:01] Uh, so for example, So it's not liking, that will be regulated. We'll be lightening network service providers like Twitter. Would they try to do the same thing? Like a tipping in Switzerland, it would be like, okay, go get a banking license. And then we talk.

[00:41:23] Mauro: So that brings into play that, you know, I think what we're saying is, um, Alex, we now have an opportunity or financial intermediaries have an opportunity to start getting involved in this, providing the trust and the service.

[00:41:41] Alex: And the window is quite small. It's maybe a few years until this will become user-friendly in a decentralized. Uh, but for this few years, definitely banks have an opportunity in Switzerland to provide the service [00:42:00] on a legal basis. And with a really like good, uh, user-friendly integration.

[00:42:10] Didier: All right. And finally, last subject of the day. I know it's Alex's favorite subject. And ifNFT so Tik Tok. Tik Tok announces NFT collection led by top creators. Let me just read you the headline. Tik TOK is launching a non fungible token collection that will see its top content creators co partner with top NFT creators.

[00:42:34] The newly announced Tik Tok top moments it's called Tik Tok top moments will feature six, uh, culturally significant Tik TOK videos as one of one NFTs from creators, including Lil NAS X, uh, Rudy Willigan Willingham, ham, uh, sorry, Rudy willing a man. Uh, Bella Porche, Curtis Roach, Brittany Browski [00:43:00] F and Mecca.

[00:43:01] My take on this is I think it's. But I think, uh, because I think NFTs will be very big. So certainly if you want something that is provably scarce, the mutable and provably authentic, you're going to stick with Bitcoin and you're probably not going to really like NFTs, but that is not the value proposition in my opinion of NFTs.

[00:43:20] Alex: Is there any, well,

[00:43:24] Didier: well, I disagree with you there because as soon I think. I think people, people will make memes and photos and anything, any virtual larger act into an NFT. I mean, you can make a, you can make a little quick MP3 video of your favorite goal scored by a, I don't know, MSCI, and you're going to put a picture of yourself and on Messi's face, and you're going to make an NFT on that.

[00:43:46] And that will bring on, in my opinion, many new business models and creators will little by little capitalize on this either by moving away from centralized platforms like Instagram, that don't really let them. Capture the value [00:44:00] of, you know, 21 million likes of your picture on Instagram. Whereas you, if you turn it in into an NFT and you charge people, maybe with lightning network, a few cents to view your thing, to view your NFT, or to use your NFT in one way or another.

[00:44:14] Then yeah. Then you're going to be able to capitalize on this. And I think that's what Tik TOK has seen. They don't want the creators to move away from their platform. Uh, so just like, just like, um, Twitter thing, we'll be able to tip people on, on Twitter for tweets. They like quick creators.

[00:44:31] Alex: So they just try to retain users on their centralized platform by bringing in some more convenience and some new features while by bringing monitor day.

[00:44:43] Monetization for whom we are not yet. Speaking of, uh, any unknown artists creating an, a NFT and becoming known artists were talking about those who are already in the top 10. It's ridiculous. [00:45:00] It's ridiculous. And to me, it's even disgusting. We are making the richer even way, way more reach and bring in like a huge barrier between the rich and the poor, uh, like the normal artists.

[00:45:18] And when you say becoming independent from this centralized platform for now, it's the exact opposite. All these NFTs are chilled through. Uh, centralized extremely centralized platform and cannot be promoted in a, in any different way. Nobody would see them without these centralized, uh, platforms. So for me, it's.

[00:45:45] Like, it's not a solution or it's a solution looking for a problem. And, uh, for example, when you say about, uh, lightning payment to, to view the NFT, the NFC is public it's [00:46:00] on the public blockchain. It can be viewed by anyone. So tipping is Vala on voluntary basis and you don't need an NFT for the steeping.

[00:46:09] You, you can put your. You could say that to unlock certain qualities of the NFT. I don't know, like being able to substitute your face in the face of messy or something like that, or some other qualities for that you're going to need to pay. No, no, that's technically not linked together. There is no technical link or obligation to pay for.

[00:46:34] Didier: Well to view 50, but I mean, I'm, I'm sure creators will become, will become creative and will integrate into an NFT, all sorts of properties that they'll be able to monetize

[00:46:45] Alex: yeah. But all of these will be done by centralized actors, by artists who are like, it's not decentralized in artists and artists.

[00:46:54] Didier: Well, he's just using the centralized platform because that's what everybody is looked at, where everybody's [00:47:00] looking. That's where all the eyeballs are.

[00:47:01] Alex: No, no nobody's looking on, on the Ethereum network for the NFTs. People are looking on a website for an Estes on dot com or I don't remember the name on extremely centralized website.

[00:47:18] And now I'm ticked off,

[00:47:19] Didier: you know, but if you, okay, the centralization comes, it's a little bit like a marketplace. If you want to sell your goods, you want to sell them where all the world people are, where all the eyeballs are looking. So those things are centralized. That's true. Tick-tock is centralized.

[00:47:32] And I would say it's even a smart move by Tik TOK. Just like you could say that many years ago, Facebook, for sure. Not for the arts. On the one hand, I'll say it's a little bit like when Facebook completely overpaid for Instagram and what's up. And it turned out to be good investments because they realized that Instagram was still all their clients were going to flock to Instagram.

[00:47:52] So they bought them first. So takeTik Tokyou could say the same thing. They realized that all the creators are going to little by little try to monetize their creation. [00:48:00] And so let's capture them before they leave. So from their point of view, it's a good. If you're a totally into decentralization, then a and Ft is not then stick with Bitcoin.

[00:48:10] And NFT the point is that you can monetize anything that you can create, in my opinion. And, and whether you're doing that on a centralized platform is secondary, please

[00:48:19] Alex: . Uh, Didier, please do an NFC and they will copy it. So you can't protect, you. Can't monetize. You can do anything. And the monetization is usually.

[00:48:30] Going through these extremely centralized platform that brings you

[00:48:35] Didier: yeah, you can copy it, but I mean, the point is not that it's unique. My NFT, the point is that what will make it valid is that people will want to link it back to the original creator. If you can prove that you got the one from the original creator, that's what people are interested in.

[00:48:52] And. There is no, there's a smart contract number. There's a smart contract number. There's a number for the creator and [00:49:00] there's a number for the objects in the, in the contract.

[00:49:03] Alex: And nobody's looking numbers because it's complicated. Exactly. And that's why Twitter is going to, that's why little by little, the, the, the software to validate an NFT will appear and it will be coming from a place you don't agree with that.

[00:49:21] I think the, the functionalities that people are selling when selling, when chillin and FTS will die miserably and the remaining zero 1% will be amazing. But for now it's, uh, so full of like ridiculous, technically false claims that, uh, it's very difficult to talk about this. And if these. Uh, well, that's what we slightly agree in slightly disagree.

[00:49:50] Most NFTs will be worthless, but that the idea and that technology will, will remain. I think that that's what I'm saying. Zero 1% of [00:50:00] the technology of what we are selling of what the technical characteristics that we are chilling when selling, and if these 99% will be proven to be false and the remaining zero 1% will be.

[00:50:16] Amazingly. But we need to find the zero 1% and get three, the full of the nonsense.

[00:50:24] Didier: Well, we'll leave it there, gentlemen. I certainly agreed that it will evolve and we will see what will be we'll see. And then it will be regulated then it's going to be okay again. Don't worry. Okay, thank you very much.

[00:50:37] We'll speak through it next month.

[00:50:46] There are no advertisements on this podcast, but if you would like to be able to contribute directly to content creators, and thus reduce the importance of centralized platforms and the importance of advertising the lightening network enable. The [00:51:00] lightening network enables you to stream money by the second for bait for less than 1 cent, no PR system could ever compete with lightening network.

[00:51:09] In order to do this, you need to download a podcast player that allows for payments with lightning. Currently I'm aware of to the breeze wallet, which is a lightening wallet and the podcast player and the fountain app, which is a podcast player that allows streaming upsets. As you do this little by little, you will become comfortable with lightning and you will see how easy it is to you.

[00:51:31] And then little by little, you will see that is the most under appreciated asset in crypto today that probably has the greatest potential to change how we make payments. You can also contribute directly to this podcast by visiting the website Swiss road to and contributing there or contributing through one of the two podcast players.

[00:51:50] I mentioned above and streaming thoughts as you. If you'd like to get in contact with me, you can visit the website of the podcast. [00:52:00] Website is the swift road to and sign up for the newsletter and send me an email there. If you would like to help other people find this podcast, please leave a review on apple podcast.

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Didier Borel - 00:00:06: Welcome to The Swiss Road to Crypto monthly review for the month of August 2022. I'm joined, as usual, by Alex Poltorak, co-founder of Hodling SA and by Mauro Cappiello, co-fo

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