#52 - t-bast, $500M, PeerSwap and much more!
✨ t-bast aka Bastien Teinturier from ACINQ
Bastien Teinturier is a distributed systems engineer working on decentralized networks and cryptographic protocols, with a specific focus on Bitcoin's Lightning Network protocol and implementation.
As VP Engineering for ACINQ, one of the leading companies building the Lightning Network, Bastien tackles one of the most pressing challenges for Bitcoin: its ability to scale to VISA-level transaction throughput, in collaboration with Blockstream, Lightning Labs and other open-source contributors.
Bastien has the ability to switch flawlessly from very technical to more high-level Bitcoin concepts and we have enjoyed very much several of his talks. So it’s a real pleasure to have this clear thinker in our modest newsletter. Thank you Bastien 🙏
We heard you say “Bitcoin is Linux”. What do you mean by that?
Bastien Teinturier: When I said that at Surfin’ Bitcoin in 2021, it was an attempt at explaining that Bitcoin is low-level open-source infrastructure that other people can freely build on and create businesses on. It’s one of the few open-source projects that really have a diverse community of contributors, with different priorities, backgrounds and wishes for the long term evolution of the project.
Another interesting similarity is the asymmetry between the project and its competitors. Who would have thought that an operating system developed by open-source, sometimes part-time contributors could challenge commercial offerings developed by huge corporations such as Microsoft and Apple? Who would have thought a decentralized digital currency created by an anonymous developer could challenge nation-states’ fiat currencies?
This comparison falls short in many ways, but as this wasn’t a technical interview, I needed something that everyone had heard of, even without a computer science background. It clearly had an impact on people, and I got a lot of angry comments about this comparison, but hey, you can never make everyone happy, right?
ACINQ is one of the few companies developing their own implementation of the Lightning Network, Eclair. How does the collaboration with other teams work in practice?
Bastien Teinturier: Working on one of the main Lightning implementations has been by far the most interesting work I’ve done in my career. It’s such a great pleasure and an honor to work with so many smart engineers and researchers. It’s an incredible learning experience and a very stimulating environment.
I strongly believe that having multiple teams with different priorities is a net benefit for Lightning: it helps curate what features we accept in the specification, while allowing every team to work on experimental features in their own implementation to gather real-world feedback before submitting new ideas to the community. It also helps identify subtle issues: implementing something many times in different codebases increases the likelihood that someone will spot dangerous edge cases or protocol issues.
We have spec meetings twice a month, and we regularly exchange ideas and feedback via the mailing list, IRC or github issues. We also try to organize a real-life event every year: the last one was in May (in Oakland), and it was very energizing to see everyone and brainstorm ideas together for a few days. Communication between teams has been great so far, and we all agree on the general direction we’re heading in. The only issue is that teams are quite small and we’re all struggling for time, so some features take a long time to be properly reviewed and implemented. But when we eventually ship them, the result is always high-quality and well thought-out!
ACINQ also develops one of the most popular Lightning wallets, Phoenix, and runs one of the biggest nodes in the network. Are there any new functionality coming to Phoenix? Any advice for node operators?
Bastien Teinturier: We’re not planning new features for Phoenix in the near future, as we’re still working on migrating the android application to a new stack (which is already used by our iOS application), based on our kotlin multi-platform Lightning implementation. This has proven to be quite a challenge because we wanted to ensure a smooth migration for existing users, but we should be able to release it soon!
Once that’s out of the way, we have many exciting new features planned.
One of them is Bolt 12 (offers), which will be a major UX change: users will be able to publicly share static invoices without giving away privacy or security. This is a feature that requires a lot of work and the specification effort is still ongoing, so it’s hard to tell when we’ll be able to ship it, but be sure that this is high on our priority list!
Another exciting feature is splicing, which will let us dynamically resize channels. Wallet users will have a single channel instead of many, and the size of that channel will automatically adjust based on their needs. This will make managing liquidity easier and improve UX: we’ll be able to tell users exactly how much they’re able to send and receive via Lightning, removing some of the reliability issues that multi-part payments across multiple channels introduced.
As for node operators, we’re currently working on dual funding, liquidity ads, splicing and peer-swap: they will be very important tools to optimize the on-chain footprint of Lightning and maximize earnings. You will hear more about these important features as they get closer to completion!
What would you advise for developers who would like to start contributing to Bitcoin and Lightning protocols?
Bastien Teinturier: This is a tough question: Bitcoin and Lightning are complex beasts, and it takes a lot of time to build up the knowledge required to start contributing. The best way to enter the space in my opinion is by attending the Chaincode residency: a couple weeks of intensive courses taught by the developers who built Bitcoin and Lightning. Other great learning resources come to mind, such as Lisa’s base58 course or the Qala program.
Since everything is open-source, developers can also directly start contributing to the projects they’re interested in. However it requires a lot of time and is really hard to do for people who already have a day job, so I really recommend switching to a full-time Bitcoin or Lightning job.
It can be hard to find a job that lets you work directly on the core protocols, but that can be done incrementally: first find a job in a company that builds on top of these protocols, use this opportunity to build up knowledge and experience, and when you’re ready you can start working on the core protocols (we’d be happy to have you!).
What is your view on the Taro protocol announced by Lightning Labs?
Bastien Teinturier: I haven’t reviewed it thoroughly enough to have a strong opinion, so please take the following with a grain of salt. There are many clever ideas in there, but I’m having a hard time understanding the concrete trust requirements and security guarantees that will be provided by “universes”. It seems to me that those will be the weakest points in the system, similar to bridges in the eth world. I guess we’ll need to see what type of universes emerge in products that use Taro, and iterate until we reach satisfactory trade-offs.
We’re not actively looking at this type of experiment though, our focus is really on Lightning itself. A whole economy will be built layer by layer on top of Lightning, so we must ensure that Lightning delivers its promises and is a secure, efficient, reliable and stable foundation. There is still a lot of work to do to reach that goal!
I find it unacceptable for example that we’re still seeing unexpected forced-closed channels in the network: they indicate critical bugs that must be fixed. Payment reliability and on-chain footprint must be improved. We know what to do to get there, but it will take a non-trivial amount of engineering and focus. We’re strongly committed to this task, so stay tuned and expect to see steady improvements across all metrics!
What are the proposed changes to Bitcoin and Lightning you are most excited about?
Bastien Teinturier: I’m most excited about three proposed changes to Bitcoin: covenants, package relay and RBF (replace-by-fee) improvements.
The first one is a long shot: we’ve been talking about covenants for many years, and we’re still not sure what form of covenants should be deployed. At the very least, I’d like a covenant mechanism that enables Eltoo, which would be a major improvement for Lightning. Covenants are also very useful for Bitcoin vaults and other L2 contracts, such as payment pools, so this would be a major change for the ecosystem as a whole.
The next two are only policy changes that don’t need a soft-fork, so I’m hoping we get them sooner. Package relay fixes an important security issue with anchor outputs: if the mempool is full and fees are high, the current Lightning protocol cannot guarantee funds safety against malicious actors. It is critical that we fix this issue. Gloria Zhao has done an amazing job implementing this feature: the code is mostly ready so we may get it in the Bitcoin Core v24 release or the next one. The last change is somewhat related: the RBF policies in Bitcoin today allow malicious actors to “pin” transactions for a long time in the mempool, which can be used to steal funds from Lightning nodes. We’ve spent a long time thinking about how to fix this and various designs have been explored. We’ve recently made some encouraging breakthroughs, but they still need to be more thoroughly reviewed.
There are also many changes coming to Lightning that I’m excited about. I’m eager to see liquidity ads widely deployed on the network: it will create an open, decentralized marketplace for liquidity which is a big win both for end users (who will be able to easily buy incoming liquidity) and node operators (who will be able to increase their revenue by selling their liquidity).
I’m also very excited about the privacy improvements provided by channel aliases, blinded paths (sorry, shilling my own work here!) and Bolt 12 offers. We’re also releasing support for onion messages soon, which are a very useful building block for a lot of other protocol improvements.
Some of the upcoming Lightning features are in my opinion under-appreciated, such as splicing and peer-swap. They will be a game-changer for node operators and service providers, especially in combination with liquidity ads once smart liquidity allocation becomes the main differentiating factor between nodes. They are an opportunity to vastly improve payment reliability and UX as well, which is often overlooked.
I want to take this opportunity to thank everyone working on specification proposals, reviewing other people’s pull requests and dedicating their time to improve the network for everyone: we wouldn’t be where we are today without that sometimes frustrating but important work!
⚔️ LNM Fam
🧡 Thanks for your warm reception of the new LN Markets front!
🥰 Woh we passed the 10k frontier on Twitter, so happy to see growing our amazing community!
🥳 $500 million total trading volume, thank you all dear friends, next stop 1 billion 🚀
📊 Market Update
🖊️ By Vetle Lunde
Bitcoin and the overall crypto market have experienced strong momentum over the last week, pushing BTC towards its consolidation range highs of $23,000.
It’s been a week filled with price-driving news headlines, leading volatility to grow. Another inflation surprise kicked in as U.S. June CPI printed 9.1%, well above the expected 8.8%. While this initially negatively affected the market, statements in favor of a 75bps rate hike from FED’s Bullard injected slight optimism to bitcoin and U.S. equities.
BTC’s correlation to U.S. equities tends to grow amid important macro events. This is also evident this week, as BTC’s correlation to the S&P sees further growth. The 90-day correlation peaked at 0.655 last week, near the all-time highs from early May.
74-day streak of extreme fear finally broken
The Fear and Greed index has climbed from the extreme fear area after a record-long 74-day streak of extreme fear. This push is affected by the strengthening momentum in the market. While the sentiment is improving, the Fear and Greed index remains deep in the fearful territory, and other viable sentiment indicators from the derivatives market suggest that market participants still exercise caution.
Volatility climbs higher
Bitcoin’s volatility remains high as bitcoin’s 7-day volatility climbs to 4.1%. The current volatility in bitcoin is high compared to the volatility seen during the summer of 2020 and 2021. Several important price-driving news headlines influence this elevated volatility. While volumes remain comparable to the last summer (when excluding the Binance surge), the hectic news cycle and reduced liquidity contribute to elevating the volatility.
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🌱 Ecosystem
🤝 PeerSwap is a decentralized P2P LN Balancing Protocol, first announced at Adopting Bitcoin last November (full talk here by Warren Togami & Konstantin Nick).
PeerSwap aims to tackle one of the most difficult problems with the Lightning Network: channel rebalancing. Indeed, while most people want channels to be balanced at 50%, it is rarely the case and most capital can be tied up in unbalanced channels, which are significantly less productive since routing algorithms remember failures and try them less often.
Hence, node operators usually open more channels or utilize multi-hop routes to balance their channels. But opening new channels can be capital intensive, and multi-hop balancing rarely works efficiently in practice.
PeerSwap follows an opposite approach. The goal of this protocol is to enable Lightning Network nodes to balance their channels by facilitating atomic swaps negotiated over custom-message with direct peers. Indeed, rather than opening more and bigger channels, you can cheaply refill channels you already have to the desired balance, in a reliable way with direct peers.
The overall goal is to enable any node to be its own swap provider. A decentralized network shouldn't need any centralized services to use.
PeerSwap currently has a working implementation for both CLN and LND nodes. An interoperable implementation for Eclair is in progress along with protocol improvement discussions.
⚠️ PeerSwap is beta-grade software. It is recommended for expert sysadmins at the moment and mainly useful for backend channel balancing with small balances or on signet/testnet.
You can join the PeerSwap community on Discord for discussion and support!
⚡ Bonus
😅 Well done Gégé
🎨 Barrabaass’ father and brother are so talented! Please DM @mugenclown for support!
❤️🔥 Bitcoin has no off switch
🤝 Reach out on Twitter, Telegram and Discord to build together the future of finance on Bitcoin!