Welcome to the 17th issue of this newsletter which covers everything at the intersection of the Lightning Network and Finance, as well as updates about LN Markets.
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🤓 Lightning Auctions with Chris Tramount
The launch of the first auction platform built on the Lightning Network Scarce.City caught out attention. Its co-founder Chris Tramount was kind enough to answer a few questions on his project (by the way, what better Xmas gift than a piece of Bitcoin art?)
Why did you decide to build the Bitcoin collectible auction platform Scarce.City?
Chris Tramount: It all started with our 1st test sale for Bitcoin time traveler themed facemasks. Two interesting things came out of it:
We got the attention of our MVP artist, ChiefMonkey. He went on to introduce us to an all-star cast of other Bitcoin artists who told us everything they were looking for in a Bitcoin-based marketplace -- auctions were at the top of the wish list.
We were shocked to see that about 1/3 of our transactions were over Lightning. That pushed us down the Lightning rabbit hole and we started to realize the potential of Lightning for app development, beyond simple payments (s/o to @RyanTheGentry for showing us the way✌️)
After blogging and talking about Lightning with our artists, it was ChiefMonkey who had the original idea to use Lightning payments to collateralize auction bids. The idea was born and we started building.
Why is the Lightning Network a relevant stack to build your auction platform on?
Chris Tramount: A major challenge of auctions is keeping participants accountable for their bids. This is generally solved through one of two ways:
Reputation Systems: The most effective reputation systems require personal information and KYC for the purpose of buying art doesn’t jibe with the spirit of Bitcoin.
Collateralized Bids: Onchain collateral payments are slow and expensive. Confirmation times kill the intensity of auction and paying onchain fees for multiple bids to end up eventually losing the auction is a terrible experience.
⚡Lightning enables us to instantly collateralize bids with minimal fees and personal information⚡
How is it going so far?
Chris Tramount: Amazing!
Our first auction for a stunning mosaic by Chiefmonkey and mosaic.rocks sold for 1 Bitcoin (https://hodlr.rocks/collaborations/the-bitcoin-phoenix/).
But the price tag doesn’t do justice to the experience. It was intense! I know with certainty that pants were soiled 😳 and vomit was hurled 🤮 (not me though :)
19 bidders placed 53 bids totaling almost 7 bitcoin.
There were several moments when it looked like the auction would end and BOOM, a monster bid comes in and extends the countdown.
Any Bitcoin artists you would recommend?
Chris Tramount: There’s so much amazing creative talent in Bitcoin. I don’t think it’s fully appreciated yet. If we really are on the cusp of a Bitcoin-led revolution, the art being created by Bitcoin artists today will become iconic.
Of course I’m extremely biased but if I had to pick one, it would be ChiefMonkey. Not only is he an amazing artist but he came up with the idea of Lightning Auctions, put his neck on the line as the guinea pig, and it worked!
The dude is a true Bitcoin Renaissance Man.
Overall, what's your view on the future of the Lightning Network?
Chris Tramount: The coolest thing is watching it become a development platform: LNURL, RGB, gaming, streaming content, private communication, LiFi...it’s a primordial soup.
We’ve just scratched the surface of Lightning’s potential. It’s only a matter of time before things get L⚡T
We are hard at work preparing our next releases.
Meanwhile, we received some good feedback from the public dashboard, which enables all of you to access directly the history of the Index and the Bid / Offer prices used as Price Reference when closing position. You can zoom the graph very precisely to find all the prices for your exact timestamps.
The number of users trading directly with our API is growing steadily.
And we are happy to see more and more users entering the Leaderboard race! LN Market’s users do not appear in the Leaderboard by default, but they can decide to do so, anonymously or not, by changing their profile settings.
It’s getting harder and harder to keep up with all that is going on right now in the Lightning ecosystem 🤯. So, here is a selection of LN-news just from the past *two weeks*.
Our friends at Suredbits have implemented a proof-of-concept for Point Time Lock Contracts (PTLCs) available to Lightning Network users running Eclair. PTLCs could be an alternative to Hash Time Locked Contracts (HTLCs) that would improve significantly routing efficiency and privacy on the Lightning network.
Speaking of Suredbits, we have now witnessed the outcome of the Discreet Log Contract (DLC) set up by Chris Stewart and Nicolas Dorier early September regarding the outcome of the US elections!
Lightning Labs have announced yet another launch with Autoloop, a new feature that allows Loop users to automatically set liquidity and fee preferences. Quite helpful to keep your channels balanced without overhead.
River Financial shows us what the future of Bitcoin exchanges looks like:
“These are attacks where a malicious user sends a payment to themselves or a confederate through a series of channels and then delays either accepting or rejecting the payment. Until the payment eventually times out, each channel used to route the payment is unable to use those funds to route other user’s payments. Since a route may cross more than a dozen channels, that means every bitcoin controlled by the attacker can prevent more than a dozen bitcoins belonging to honest nodes from being used for honest routing.”
Well, good news: Gleb Naumenko and Antoine Riard just received a grant from 100x Group to explore a different approach to mititgate channel jamming attacks through UTXO ownership proofs. A positive development for the security of the network (more info here).
In the continuity of his work on #lnresearch, Christan Decker has created a “timemachine” that will enable researchers to reconstruct the Lightning Network at any point in time:
And finally, a demo of programmatic instant FX trading using Lightning rails:
Quite the sleeping ecosystem 😅
🔮 Good stuff to read and listen to
Awesome post by mainstream economist Niall Fergusson on how Bitcoin is winning the Covid-19 Monetary revolution:
The crux of the argument is that Bitcoin is not only scarce but (as Wences Casares argues) sovereign. “No one can change a transaction in the Bitcoin blockchain and no one can keep the Bitcoin blockchain from accepting new transactions.”
It’s important to be aware of the bearish arguments on Lightning, summarized here with this podcast by Stephen Livera with Udi Wertheimer and Eric Wall. Ryan Gentry’s counter-arguments are definitely worth a read too:
Stephan Livera @stephanliveraSLP230 Udi Wertheimer & @ercwl - Is Lightning The Future of #bitcoin Transactions? - How much payment demand is there? - What about privacy, custody trade offs with LN? - Use of other tech/layers - Eric's bet with @RyanTheGentry & @giacomozucco https://t.co/JHwI7KDttg https://t.co/S649CZVchY
It’s nice to see the level of bitcoins held by exchanges during this bull run. Could non-custodial trading solutions such as LN Markets play a small part in that trend? We certainly hope so!
And let’s conclude this issue as we started it, with some futuristic Bitcoin art!
Thank you for your support and let’s keep building the future of finance together!