Roy Sheinfeld Timestamp: 0:00
For us, bitcoin is PeerToPeer only, meaning noncustodial only users need to hold their keys. Because if they don't hold the keys, it's not bitcoin. People don't realize that they app stores, and specifically the mobile operating systems are the point of failure, meaning these are the real point of resistance when it comes to mass adoption. Everyone can become a merchant like using Lightning. They don't need the bank account, they don't need the KYC, they don't need to do AML, they don't need anything. They just need to download an app and start accepting Lightning payments and bitcoin payments without interacting with the fiat monetary system. That's huge. Breez is currently between two hundred k to three hundred k transactions a month.
Kevin Rooke Timestamp: 0:52
Roy Sheinfeld is the cofounder and CEO of Breez, a self custodial platform for streaming SAPS to podcasters, accepting payments as a merchant, and sending and receiving bitcoin over the Lightning Network. In our conversation, Roy shared some insight into Breez adoption to date. We explored some of the use cases and some of the power users on the app today, and we even got into the business of supplying liquidity on the Lightning Network. I've also added Roy and one listener to today's show splits. The listener sent in a great question for Roy, and as I mentioned, that's part of the new format for the Lightning round. So if you enjoy this show, the best way you can support it is by sending in sats over the Lightning Network. That reflect the value you got out of this episode. And if you want to earn some sats now, you have an opportunity to do that on this show. Keep an eye out for my Twitter. Every time I'm interviewing a new guest, I will announce it a day before on Twitter. And that is your cue to send in comments and questions for that guest. You can ask that guest anything you want and you can send that comment over the Lightning Network using Fountain and I will pick the best question and I'll add that person to the show Splits so they earn some sats quickly before we get into today's episode. Today's show is sponsored by Voltage. Voltage is the industry standard and next generation provider of Lightning Network infrastructure. Today's show is also sponsored by Zebedee. That's Zebedee. And Zebedee is your portal into the world of bitcoin gaming. We'll have more from Voltage and Zebedee later in the show. Roy, thank you for joining me on the show today. We've got a lot to discuss about Breez, but before we get into that, why don't we start with your background in bitcoin and the first moment that you learned about the Lightning Network and decided, yeah, this is where I want to spend all of my time. This is what I wanted to vote my resource.
Roy Sheinfeld Timestamp: 3:01
Sure. I actually been into bitcoin since 2013. I was orange billed by my partner, my co founder Akiva. He made me read the satoshi's White Paper. And after I read the White Paper and had a couple of discussions with Akiva on the White Paper, the implications of the White Paper, I decided to buy some Bitcoin and I forgot about it until 2018. In 2018, I actually had a personal crisis. I got chronic disease, I was approaching my forty s and I got chronic disease, which made me really reflect on I know it sounds like cliche, but my purpose, where do I want to spend my time? What are the right priorities in life in general? So I took a little break from everything and dived into what was then an emerging network, the Lightning Network. And after reading Darja and Poon's White Paper on the Lightning Network, I realized there's something huge here that can help transform bitcoin from a store value to a medium of exchange and really realize the Satoshi's vision of peer to peer electronic cash. So I decided to leave my previous startup, I was a co founder or CTO in a different startup and enterprise, B, two B collaboration startup called Harmony. I decided to leave Harmony and to found Breez, and I brought together to this journey my co founder Zakiva Android, which worked with me in my previous startup, and we decided to help Bitcoin do this transformation from store value to a medium of exchange.
Kevin Rooke Timestamp: 5:15
Wow, that's an interesting story. I wonder, how far do you think we are in that transition today? Like from a store of value to a medium of exchange? Have we started this transition? How far do we have to go before we've got product market fit there? And people recognize that Bitcoin can also be a medium of exchange in addition to a store value.
Roy Sheinfeld Timestamp: 5:41
Yeah, so we're definitely very early. So for everyone who hesitates whether to jump into Lightning and start developing enlightening because they missed the boat or anything like that, well, you didn't miss the boat. Come, we need all the help that we can get. There's so much to do and we're still very early in crossing the chasm. When we started Breez, we actually saw that there was a huge gap in the market because first, no one came from a product centric point of view, we wanted to come from a product centric standpoint, meaning envision how Bitcoin will be adopted by the masses until the product that will fit that goal. But we wanted to do that in a non custodial fashion. So back when we started in 2018, you have either very complicated wallets where you had to do everything on your own, like you had to be a very tech savvy person in order to open channels, move channels from the chain to the channels, all the liquidity management yourself, and you really had to know the ins and outs of Lighting network in order to use the network. Or as an alternative, you could use custodial solutions like Blue Wallet or World of Satoshi that allowed you to interact with the network, but in a custodial fashion. For us, Bitcoin is peer to peer only, meaning noncustodial only users need to hold their keys because if they don't hold the keys, it's not Bitcoin. There's no reason in my mind to do Lightning Network if it's not peer to peer, if it's not noncustodial or self custodial. So we sought out to close the gap, to bridge the gap, and to bring a noncustodial user experience that is on par with what custodial solutions and even Fiat solutions has to offer. So we think that we can provide a much better together with the core properties of Bitcoin, together with the values of Bitcoin, we think that we can provide even a better user experience than what Fiat solutions have to offer.
Kevin Rooke Timestamp: 8:23
And how do you go about not only improving on an on chain Bitcoin transaction, but then improving on a Fiat transaction where it may just be someone tapping their Apple Watch or their phone at Starbucks? How do you think about trying to improve on that Fiat experience?
Roy Sheinfeld Timestamp: 8:42
I think we can achieve when it comes to what Fiat has to offer right now, I think we can achieve the same user experience. If you see what the guys at the corner corner just released with a Bold card or Breez support and FC for a while now, so we can use Breez and do NFC interaction, it's not as seamless as Fiat right now because it's not integrated into Apple Pay, Google Pay, by the way, we can talk about that because I think when you talk about censorship, resistance and our barriers of bringing Lightning to the world, people don't realize that the app stores and specifically the mobile operating systems are the point of failure, meaning these are the real point of resistance when it comes to mass adoption. There's a lot of limitation and restriction that comes along with the app stores. For example, they can ban Bitcoin applications. No one can tell them otherwise. If Apple tomorrow decides that there won't be any Lightning or Bitcoin applications in your store were fact, sorry, that's a huge problem. But when I say that we can provide a user experience that is better than Fiat in some regards, I mean concepts like streaming sets. You don't have the capabilities of streaming Fiat because Fiat is not built to do microtransactions, whereas enlightening the core technology allows you to execute very efficiently microtransactions that allow suddenly there are new use cases that are opening up to the world where users can stream sets to content creators. So one thing that we've done in Brisbane, we've embedded podcast player into our application in order to experience how people interacting with the concept of streaming sets to content creators. And it's very successful. It's been huge for Breez specifically into the ecosystem in general, because we see other applications emerging that also allow this experience. Currently mostly in podcasting, but I think we can scale to other experiences like music videos, etc.
Kevin Rooke Timestamp: 11:17
For interesting. Yeah, I've seen a lot of people send in sats from Breez actually to this podcast. So that's something that I'm keeping an eye on. There seems to be a lot of participation from all sorts of Lightning apps. And you're right, this sat streaming idea has really it seems like it's found product market fit in Lightning podcasting. What is it going to take to get that to expand to music or books or blog posts or other forms of media on the internet? What do we need to do? What was the reason, do you think, behind why did podcasting find success first? And what can we do to get to the point where other forms of media can also find that same success?
Roy Sheinfeld Timestamp: 12:07
That's a great question. Like bitcoin fixes everything. I think bitcoin fixes money. And where money needs to be fixed, then there's huge value to end users. What I mean is that when it comes to podcasting, specifically, Adam Curry and Dave Jones created the Value for Value Podcasting 2.0 platform, where it's an open podcasting platform where everyone can register regardless of the Apple repository. And there are new podcasting app that allows you to interact with the repository of podcasting. And to that platform, they added several features. One of the features is the ability to monetize the content using Bitcoin. Now why Bitcoin is a perfect fit for the Podcasting 2.0 platform is because Bitcoin is censorship resistant money. And we're talking about a free platform that enables freedom of creation, freedom of speech, and you need censorship resistant money that will support that. Meaning, if you use Patreon, if you use any other credit card, PayPal, any other fiat platform to support content creators, then the monetization, the intermediate, the people, the entities that control the monetization actually control the content. So if PayPal or Patreon or any of these fiat platform don't like your content, they can shut you down in a second. So in order to support a freedom of speech platform, you need censorship resistant monetization. And that's why I think Bitcoin is a perfect fit for the value for value platform. And that's why I think it's also found the right product market fit, because our users understand that and I think the Fountain users understand that. And I think everyone that currently is active and compensate content creator, podcast creator using Bitcoin understand that Bitcoin is an essential tool for freedom. I think that's one of the reasons that we were very successful with bringing Bitcoin to podcasting two point oh and bringing Podcasting 2.0 value for value to market. I think there are other domains where it can be very successful and actually fixing the money fixes the industry. I think music is a great example of that. I don't know if you're a musician, but I have some musician friends and I'm talking to a lot of musicians. They don't see the money. I have a friend that he's a successful musician, he has a lot of tracks released like using in soundtracks and in a playlist all around the world. And he doesn't see the money. Why? He doesn't see the money because there's a bunch of intermediaries between him and the money. Like if we were able to compensate artists directly, meaning users, listeners, listening to music, we'll be able to compensate artists directly, peer to peer without any intermediaries. That's a game changer for the music business. We're making some progress on that and I think the future is very bright when it comes to integrating bitcoin into the music industry. Of course it will be challenging, of course existing platforms will fight us, but I think it's a natural progression.
Kevin Rooke Timestamp: 16:32
How do you think about the importance of the fact that podcasts are an RSS feed and it's kind of just like open standard and anyone can act like the podcast index can kind of access all the podcasts, whereas the music industry, it seems like it's a little more closed off and it's got labels, a few labels controlling basically all the music in the world. Is that an important factor in thinking about the adoption of sat streaming for podcast versus sat streaming for music?
Roy Sheinfeld Timestamp: 17:04
You're hitting the core issue on the difference between the podcasting business and the music business, the fact that Adam and Dave had created the podcast index already. And we add an existing platform to Latrone with millions of podcasters already registered to the podcast index platform. That really helped with the bootstrapping of podcasting 20 and integrating bitcoin into podcasting. We don't have a similar open standard open platform in the music business, but we do have some platforms like SoundCloud, like a podcast or bandcamp, where artists already adding their music to these proprietary platforms. And imagine that SoundCloud or Bandcamp integrates bitcoin compensation to their platform so you can have and they act like as the open repository. Although it's not an open standard. Any platform that allows artists to upload their music to their own platform can integrate value for value monetization or bitcoin monetization capabilities. They can add these capabilities into their platform. And then apps like Breez, like dedicated music apps, can integrate with these APIs, with the APIs that this platform provides. And all of a sudden you have a repository of a lot of artists that are ready to be compensated using bitcoin. So I think the key to unlock and bringing the music product to market is by leveraging existing platforms like bandcamp or SoundCloud.
Kevin Rooke Timestamp: 19:08
Now, when you think about the potential impact that Lightning payments sat streaming could have on podcasting, because we're still pretty early in podcasting and in music as well, because that's basically untapped at this point. What are you hopeful about? Like, what do you think in a world where Lightning payments are integrated into every music and every podcasting app, what is that world going to look like for the creators themselves? How does their life change as a result?
Roy Sheinfeld Timestamp: 19:44
Ask yourself what's the cut Spotify takes on music being streamed in the Spotify app. Ask yourself how much money is not getting to the artist pockets. So I think the answer is twofold. One, I think artists will be the fact that artists are being compensated directly from their app. That ensures they get the larger, not just the largest cut, but a very large cut. I think they can take 95% from the money being streamed to them instead of getting fraction. Right now, that's one fold. From a user standpoint, the value that the users get is becoming much higher because they compensate only the artists that they want to compensate. Meaning it's not like they have a subscription license where they pay $20 a month and all the artists in the world need to use to split this power in order to make some money. And they get value by interacting directly with the artist. Meaning it's not just about monetization as you see in podcasting, it's also about communication, being able to compensate, being able to stream sats. It's not just about the monetization aspects of the sat streaming, but it's also the ability to interact directly with the artist. In Podcasting 2.0, we call this concept boost a Gram, where you send sats and you boost, you boost the show or you boost a podcast episode and you add a message to the podcaster and the podcaster on the other end can read the booster grumps on the show and respond to their listeners. I think we can get to some sort of direct interaction with artists as well, where you can boost your music, you can compensate your artists and also send messages while you're doing that. And that's really changed the dynamics of interactions between listeners and artists. So I see a lot of potentials there as well.
Kevin Rooke Timestamp: 22:40
Yeah, I've started to recognize the importance of the communication at first when I started doing this podcast, I figured the sats are going to be the most interesting thing for me, that receiving actual money would be the most interesting, but really like the messages that come in and just people saying thanks for the show, really enjoyed this, asking interesting questions. That's starting to have more value to me now. And it took me a while to recognize that. But it really seems like that it's a onetwo punch. It's like you get the payments and you get these direct messages that otherwise you just couldn't get.
Roy Sheinfeld Timestamp: 23:17
Yeah, it's kind of one and the same, right? Because what is money when you think about money, money is a manifestation of value that you bring to the world, right? People send you money because you create value for them. But with Boosted Ground now, they can attach a message to explain to you, why did you create value to them? Why did you bring value to them? So it's kind of an explicit communication that is attached to money that wasn't feasible before boosted Grams, before Lightning. So yeah, I think it's very cool.
Kevin Rooke Timestamp: 23:58
That's an interesting way of explaining it. Like maybe you get a check in the mail and it's $1,000 and you're like, wow, I just got $1,000, but you don't know why. And now it comes with a message and you're like, here's $1,000 for XYZ reason. And it carries a lot more meaning and you can recognize why you got it and you can build towards that and you can integrate those things in the podcasting side of things, as I see boosted grounds come in for certain topics or certain guests, I can integrate more of that into the future and I can improve the show based on that feedback. Yeah, there's a lot of you get.
Roy Sheinfeld Timestamp: 24:39
Some insight on your users, on your listeners at least. I know from my artist friends, from my musician friends, that this type of interaction is very important to them. The only interaction they get is when they are doing their live shows, live concerts, and they get some kind of interaction with the audience. And now with social platforms, there are also other types of interactions, but it's skewed by the nature of the social networks with value. When people send you money and say why they send you money, I think it really provides a different insight to the audience.
Kevin Rooke Timestamp: 25:26
Now I want to transition from the podcasting to another app that you guys have within Breez right now, and that is the point of sale. Can you explain to listeners how your point of sale system works today?
Roy Sheinfeld Timestamp: 25:42
Yes. So maybe let's take a step back and explain. Like when you say Breez and Point of Sale or Breez and podcasting, what do you mean? Because Breez is kind of unique when it comes to building experiences on top of Lightning. By the way, I don't call Breez a wallet. I say that every time I give an interview. For me, Breez isn't a wallet, it's an app. People don't think about cash as a wallet. They don't think about PayPal as a wallet. I think in the same regards, we don't need to think about Lightning wallets as wallets because they provide an end to end service. It's a payment service, essentially, and it also opens up a way to think about the app. Because I never thought about Breez as a wallet, it allowed me the freedom to add different experience into Breez. When you look from the outside, it's very strange. Like why someone will add a point of sale interface to why will someone add a podcasting player into it. But when you interact with if you are a risk user, the most common feedback that we got after releasing either the point of sale or the podcast player was like, I never thought it made sense. But now that I'm using the app, it feels so natural to me. And that's exactly the feedback that we wanted to get because we wanted to experiment and to see how users can interact with the Lightning economy. And when it comes to merchants, I think merchants are kind of neglected. Again, Lightning provides new capabilities. Lightning provides new functionality that didn't exist prior to Lightning. In the specific context of merchants, everyone can become a merchant. Like using Lightning, they don't need the bank account, they don't need KYC, they don't need to do AML, they don't need anything. They just need to download an app and start accepting lighting payments and bitcoin payments without interacting with the Fiat monetary system. That's huge. And the reason we added the point of sale interface into print is exactly in order to enable those that are not tech savvy, plain, ordinary people that want to start accepting bitcoin lighting payments. That's why we've added the merchant interface, the point of sale interface into Breez. And it's been huge for us because suddenly people are becoming merchants, and we have people that sell fruits in the markets in India, and we have people in South America, and we have also people from the Western world accepting payments, lighting payments from people that comes to buy their merch. And that's amazing.
Kevin Rooke Timestamp: 29:19
And it's all directly from their phone too, which is the cool part. It seems to me like I wonder why that's not obvious to everyone today. Like, I go into a grocery store and I tap on a point of sale terminal. It's this big clunky device that's like, it's only good for one thing. It seems like it's maybe built ten or 15 years ago. It doesn't look particularly appealing, or it's not obvious that that should be the correct hardware for accepting payments. And now you can just do it with a phone. Do you think that phone is going to be the winner in this point of sale hardware system?
Roy Sheinfeld Timestamp: 30:04
I think Square won the battle for us like Square did the market education when it comes to using your mobile phones as point of sale terminals. We just piggybacked on that and said, if you have Square, but Square makes you interact with the traditional Fiat monitoring system, why not do Square for Lightning and add point of sale to a Lightning app? But there's definitely a lot of merchants that would prefer to use their phone in order to accept Lightning payments. To accept payments in general, specifically street merchants, mom and pop shop that they don't need to buy an expensive terminal, they don't need to buy a subscription license in order to maintain the point of sale. They just use their mobile devices. Also, we see a vertical where Breez is very successful is with the bars and restaurants, where restaurants owners or bar owners give their employees cheap mobile devices in order to start accepting payments instead of buying point of sale, expensive point of sale terminals. But it doesn't fit like a large grocery shop or a supermarket. I don't think it fits all the use cases out there, but definitely for the small merchants, the small mom and pop shop, definitely it's a winner.
Kevin Rooke Timestamp: 31:48
Now, when you think about the future of accepting payments for merchants, there's a few different types ways in which you can make payments on Lightning, right? You mentioned before, I think you have NFC enabled and you can use something like you mentioned the Bolt card as well. You could just tap a Bolt card, tap a phone tap, and just make a payment through a tap. You could also do QR codes. You could also do a Lightning Address. Is there going to be just one payment kind of standard that wins out here? Or is there going to be different payment use cases that fit towards different standards? Like maybe Lightning Addresses for ecommerce, maybe tap for in person retail. What do you think about when you think about the different types of payment methods? Where do you settle on?
Roy Sheinfeld Timestamp: 32:44
I think you answered the question when you ask the question, meaning I think every method has a different kind of use case. You need a QR because it's a visual object that you can scan. So if you read a menu, if you have a menu, it's very easy to scan a QR code in order to purchase something from a paper or if you have a sign, if you have a sign, it's very natural for the sign to include a QR code for you to be able to scan it. You need a Lightning Address or a human readable form destination when it comes to typing. So sometimes I want to send funds to a friend and I just want to type in their address in order to send them funds. Sometimes it can be just a link and the link, I don't care what's behind the link because I just click on something and then everything magically happens behind the scenes. Like the specs. The specifications that we have with Ln URL Pay and Learn URL Withdrawal demonstrate the power of links. So I think we'll end up with a variety of choices. I think Lightning Address specifically is very powerful because you can obfuscate different specifications behind the Lightning Address, meaning a Lightning Address. Currently it's the LN-URL Pay specification, but when we'll have Bolt 12, it can resolve to a Bolt 12 specification. And if we'll have keysend integrated into Lightning Address, that's something that I'm trying to push. For example, in the case of Podcasting 20 in your show, when you add the value tag to your podcast, instead of writing the public key of a node, you can just add your Lightning Address and the Lightning Address can resolve to the public address of a node. And then you suddenly have a key sent that is behind a Lightning Address. So Lightning Address can obfuscate several, aggregates several payment methods, and then it's up to the app and up to the user to choose the payment method that they want in the specific context of the use case. So, for example, you can have Kevin@breeze.com, in the context of podcasting, it's very natural to do keysend, but in the context but if I type it and I send you some money through the Breez interface, it's very natural to do an LN-URL pay interaction where I have a proof of payment. So I think it's up to the app and up to the user to choose the specific payment method. But just to summarize and to answer your question, I think each method has its merit depending on the specific use case.
Kevin Rooke Timestamp: 36:08
Yeah, that makes a lot of sense. You mentioned some initial signs of traction. You talked about merchants in India, in South America. I want to get a sense for like, what do you think is the most popular, the most popular types of payments are the most popular users in people who would want to use the Breez point of sale system. Where do you see the most adoption happening today and where do you think that adoption happens in the future?
Roy Sheinfeld Timestamp: 36:40
So actually, I don't have statistics or metrics because we don't track our users. We see most of the adoption coming when it comes to the point of sale, specifically because in podcasting, clean in the sense that we don't have any trackers or anything in the software that provides analytics to us. So I don't know, generally speaking, I don't really know. What I do know is from our lively, very lively community, it's a completely different vertical, completely different people. So merchants, we have pockets in South America, all over, really. Also large countries like Brazil and Argentina, and the smaller countries like Peru and El Salvador, we have some great usage there. Also East Asia, we have pockets in Thailand and pockets in the Philippines that are using our point of sale app. And also in strange places in Europe, for example, in Finland, there's a company that is pushing the Breez point of sales to bars and restaurant owners. So we get a lot of traction there. So it's kind of a very eclectic user base when it comes to our point of sale and really all over when it comes to podcasting. United States rules, Western Europe rules, specifically Germany. That's the stronger territories.
Kevin Rooke Timestamp: 38:34
I hope you're enjoying the show so far. I just want to give a quick shout out to our sponsor, Voltage. Voltage is the industry standard for Lightning Network infrastructure, creating layer two applications and services on top of bitcoin starts with Voltage, where you can spin up nodes, get access to liquidity, optimize your node, and much more. Voltage is leading the way as the next generation provider of Lightning Network infrastructure. And if you want to get a free trial and start using Voltage today, you can do so at Voltage.cloud between the podcasting and the point of sale. Do you think about what might be an additional app that you can layer in or additional feature that you can layer in here? When you think about Breez's Roadmap, how do you think about adding new features beyond those two?
Roy Sheinfeld Timestamp: 39:25
Yes, that's a great question. We actually already built something called Lounges that allows users to stream set to live video streams. So you can think about something like Spaces just with a live video feed where the users can stream set to the people that are speaking in the lounge. This is something that we've created but didn't roll out. I'll explain why in a second, but I think it can be huge. It can be huge. Not just for content creators. Like for example, you can host your show live and get the people streaming sats to you from Breez. But it can also be useful for one on one interaction. So if you can have like a private lessons or you can have professionals assist you with a specific task and then you can pay them directly using this. So this is something that I think is very powerful like the video, the ability to stream sets during video sessions I think can be very powerful. Use case. And another thing that I always wanted to create is the chat messaging interface with Lightning monetization. So something signal with Lightning, something like think about an encrypted peer to peer metrics, maybe matrix with Lightning monetization to bake Lightning into an open peer to peer encrypted messaging system. I think that also can be a really nice experience for Lightning.
Kevin Rooke Timestamp: 41:32
Who do you think of as your competition? Because these are all different spheres you're operating in. How do you think about where is Breez trying to take users from? Or where is Breez trying to create new opportunities where none previously existed.
Roy Sheinfeld Timestamp: 41:55
What you see in Breez now is just a sandbox. Meaning we're exploring and we're doing market research in order to understand how people interact with the Lightning economy and what are the ways where Lightning can provide value to end users and where is exactly the product market fit of Lightning. That's what we're trying to do. And that's the reason we added the point of sale interface into Breez to understand if there's value there, if people find it useful. If Lightning is a game changer when it comes to merchants, that's why we added the Podcasting 2.0 capabilities. That's why I'm thinking about other experiences. But Breez, we're not seeking to compete on the front end. Meaning what we are aiming to do is to provide the infrastructure, the noncustodial infrastructure in order to create these Lightning experiences. So we have a mobile first noncustodial approach to Lightning and we want to provide the infrastructure that will enable us and maybe other developers to create Lightning experiences on top of our infrastructure. It's not just about front end. Most of the work that we're doing is actually not on the front end. It's actually on the back end. It's actually how do we ensure a seamless experience when it comes to Lightning monetization? It's building what I call an LSP Lightning service provider that facilitates all the Lightning transactions without burdening the user in doing channel management. So it's a plug and play experience from an end user standpoint, but there's a lot of stuff that are going on on the background in order to facilitate that. So it's a Lightning service provider that opens channels to end users, manages liquidity, ensures that routing is successful. There are other services that we provided to our end users like mobile notification, Ln URL interaction, currency conversions on ramp. So we integrate with Moon Pay in order to allow users that don't have Bitcoin in order to enable them to experience Lightning and to start interacting with Lightning. So there's a bunch of services that we develop in order to onboard newcomers to Lightning and to ensure that users have seamless experience when it comes to Lightning payments. That's most of the work. The experiences on the front end that we're building is to see to test new capabilities when it comes to our infrastructure. So, for example, when we added the podcast player into Breez, we had to create the sats streaming capabilities. And it's not that trivial meaning there's logic on the client side that aggregates the payment, that sends the payment only if the fees make sense. And if it doesn't, they accumulate the payments until it passes a certain threshold, then stream the set. There needs to be some kind of a rate limit in order to utilize the channels in an optimized manner. So everything that you see on the front end requires a lot of work on the back end, right?
Kevin Rooke Timestamp: 46:02
And so that back end, you can then export that into other apps. Like if I was to say I'm going to create a Substack on Lightning or Medium on Lightning, I could plug into Breez's backend infrastructure and use that as the non custodial way to store sats. And I could even stream sats through Breez's infrastructure. Is that right?
Roy Sheinfeld Timestamp: 46:27
That's the plan. Currently, you can't really do that. You can do that if you fork our code and customize. But it requires a lot of knowhow and you need to be expert in order to do that. We plan to simplify that and we plan to open up our platform to every developer that wants to integrate Lightning monetization into their own stack. And we want to provide a noncustodial Lightning infrastructure to everyone because we want to bring Lightning to billions of users. And we think noncustodial is the only way to go. We don't want you to use custodial APIs, we want you to leverage noncustodial APIs. So the plan is to do that. Part of the reason we're adding support to other platforms besides LND. Currently, we're running an LND node on your mobile device. We recently announced a collaboration with Blockstream. Blockstream is developing an infrastructure called Greenlight, which it allows you to run your node in the cloud, meaning all the end user node will run in the cloud, and the keys will remain on the mobile device. So it's kind of a hybrid approach to Lightning, which helps with the user experience. But the biggest advantage of this platform is that it will enable us to work against a single node from multiple applications. So you can think about Breez right now, Breez is kind of an omni app. All the experiences are baked into Breez, but with Greenlight, we'll be able to spin off the podcast player and we'll be able to spin off the point of sale app to separate apps. So you can think about multiple apps, but all these apps will work against the same Lightning node. So the same balance will be reflected in different mobile applications, and that's kind of a game changer for us. And this will lead us to open up our platform to other developers and even to create an SDK that will allow other developers to interact with our infrastructure.
Kevin Rooke Timestamp: 49:04
One thing I'm concerned about in the Lightning ecosystem right now is the fact that there are so many different apps and most of them have your balances siloed within that app. I mean, there are some ways you can plug into your node and stuff like that, but a lot of the apps that I use today, I have a balance on that specific app. Like, I have my balance on Fountain, I have my balance on Stacker News, I have my balance on this and this and this. And I wonder, like, if we get ten times or 100 times as many app developers building, are we going to like certainly we must become overwhelmed at some point with the number of different balances that we have to maintain. Do you think that over time, there's going to be one standard across the entire ecosystem that everyone plugs into and your balance is reflected everywhere? I guess this could be directly through your node. If every app integrates with a node.
Roy Sheinfeld Timestamp: 50:04
I feel the same, and I think it's a big user experience issue when you don't have that with Fiat, right, you either use your credit card or you use the Plaid or some other platform in order to tap into your bank account. And all these different applications in the Fiat world are working against the same balance. You have use cases where you top up specific apps, but that's very rare. Like, it's very common for Fiat application to either use your credit card or use a Plaid kind of integration in order to interact with your single balance. I think we must bring the same experience to Lightning. And I think what ultimately you want Stack, your News, Fountain, your wallet, your Breez, or wallet of Satoshi or whatever wallet that you use, you want them all to work against the same balance. And what we're pushing is to have this type of experience, a single balance experience or a balance experience that the user control. But it's up to the user to decide what he wants to do, what they want to do with their balance. Currently, all this application found in Stacker News, they're doing that because of a technical limitation, because the only way for them to provide the wallet capabilities that is decent and that work is through a custodial solution. And that's why they host the wallets and that's why they manage the funds. It's not just the user experience issue. It's also a big problem when it comes to regulation, censorship, resistance properties, et cetera. So I think most definitely, I see a future and noncustodial future where you control your balance. Only you can access your funds and you have a single balance experience. And that's the future that we're working forward now.
Kevin Rooke Timestamp: 52:17
I want to get your take on something you've written about the tension kind of between building a new Internet on Lightning versus building Lightning into the Internet. Can you describe that tension and where you fall on that kind of, like, spectrum?
Roy Sheinfeld Timestamp: 52:38
Yeah, definitely. So I think I wrote about it in one of my Medium articles. I think we're in a kind of a crossroad when it comes to Lightning, whether some people see Lightning as a cure for all the problems with the existing Internet infrastructure, and they think they can rebuild the Internet on top of Lightning because Lightning essentially is a decentralized network. So if we want a decentralized Internet, why not build a new Internet on top of Lightning? But that means essentially, one, that you need to bring new users into the new Internet, and second, that you need to use Lightning in other ways that are not directly related to monetization, meaning you're evolving Lightning from a payment network to kind of a generalized network that can send messages, generalized messages, because you need generalized messages in order to build a new Internet on top of Lightning. So that's the first camp. The second camp says, why rebuild the Internet if all we need to do is fix the money and maybe we should bring the Lightning into the existing application and Lightning into the existing Internet in order to bring Lightning to the masses. I'm definitely on the second camp if you ask me what I prefer to do. I prefer to bring Lightning to Twitter, TikTok, Signal, Matrix, even podcast index, as we discussed, but also spotify mainstream application. So I envision Lightning. I think Lightning can compete with fiat. I think Lightning can be an alternative monitoring system, and I want to bring Lightning to where a user resides. And if you are following what Greece are doing, we always try to do that. We're always trying to bring Lightning to where users exist and to accommodate their existing need. And we don't want to reinvent a new Internet on top of Lightning. That's why when I'm talking about podcasting, for example, is I want to integrate into existing platforms like podcast index, like when we're discussing music, I don't want to build a new music platform on top of Lightning, but I want to use Lightning monetization when it comes to bandcamp or SoundCloud. When we talk about messaging apps, I want to bring Lightning into Signal Matrix, et cetera, and not build a new application on top of Lightning to facilitate messaging.
Kevin Rooke Timestamp: 56:04
Right? Yeah. The Internet has got a very powerful network effect that has been established over the last couple of decades. Now, if you were trying to make the opposite case, though, if you had to do your best job of explaining why we should have a different Internet, a Lightning Internet, a generalized Lightning Internet, how would you make that case?
Roy Sheinfeld Timestamp: 56:28
Yeah, I would say that the Internet is all screwed up. It's controlled by large companies and it's very much not censorship resistant. Meaning if you post something that is not according to the right morals that are now in fashion in Twitter, then you can be banned from Twitter. And we don't want the big cooperation to control our way of life. And that's why we need the censorship resistant platform in order to rebuild the Freedom experience. That would be my alternative argument to that.
Kevin Rooke Timestamp: 57:20
I like it. I appreciate the thoughtfulness. I'm going on both sides there. I want to get into there.
Roy Sheinfeld Timestamp: 57:27
There's something to it. There's something to it. I'm not saying that there isn't. I don't like from a technical standpoint, Lightning isn't built like from the ground up. It doesn't really build in the right manner to facilitate generalized messaging. So everything that you'll do in order to build a new Internet on top of Lightning Network will be kind of a hack that's from a technical standpoint.
Kevin Rooke Timestamp: 57:58
Right now, I want to dive into one final network effect that's being built on Lightning right now, and that's liquidity. And I want to understand, you guys have a liquidity service provider business. I want to understand how that works and what that business model looks like today.
Roy Sheinfeld Timestamp: 58:18
Yeah, we actually created this concept of an LSP Lightning service provider amount. So if you added the 500K satoshi to Breez, that essentially provide liquidity, that's what the service does by the end of the day. So when users top up, breeze magically behind the scenes channel is being opened to them from the Breez LSP. And we open a channel with channel using your 500K, plus we add one hundred K of inbound liquidity to your channel. And we take a fee for that for opening the channel. Because there's on chain fees and there are closing fees and there is a cost of locking up the liquidity in the channel. So currently we take 4% or 2000 sets. That's the fee that we charge for our LSP services. By the way, Breez, you can open channels from other nodes in Breez, so we don't vendor lock you in Breez so you can actually use Ellen URL channel or even manually open a channel from other nodes and not use our LSP services. But by default, if you are non tech savvy users, you'll use our LSP services. And we also plan to integrate third party LSP, so we want to open Breez to third parties SLP. The reason that we've created LSP is because no one created an LSP before us. So we had to be in the LSP business because we wanted to understand the dynamics of an LSD business. Now there are new companies like Synonyms with their block tank offering, and others will arise for sure that will provide LSP services, which is great. I think the next step in the evolution of the liquidity when it comes to network is more LSP in what I call liquidity markets standard, where all the LSPs can participate in liquidity market and users will have a variety of choice. That's where I think Lightning is headed. Liquidity in general is the key to the success of Lightning. It's a function of the liquidity in the network, the percentage of successful payment. But in order to do that, we need to start treating Lightning as a liquidity network, meaning we need to start generating yield from Lightning Network. And we need people to be motivated to be incentivized to put their bitcoins in Lightning Network, meaning it needs to start generating meaningful yield to users that lock their liquidity, lock their bitcoins in liking network. If we manage to do that and to provide utility using the Lightning Network, meaning we need to drive traffic. Traffic drives liquidity demand, liquidity demand drives yield, which drives traffic, which drives liquidity, which drives yield. So it's kind of a circle that we need to really be focused on, and we need to make sure that everyone that is taking part in the Lightning Network is being incentivized properly. We need to stop treat Lightning as a community project and start treating Lightning as part of the like, from an economic justification, from an economical, viable standpoint. And we need to start making money out of Lightning. I think Lightning has reached to a point where we can finally take it seriously. We think that will bring value to end users with our offering, with our merchant applications, with our podcasting, with the infrastructure that we are building. And we need to start taking it seriously. People node operator or starting node operator needs to start generating yield. We need to advertise this yield, and we need to bring more money into Lightning.
Kevin Rooke Timestamp: 01:03:00
Yeah, there's a viral feedback loop going on there for sure, which is really important. And once it gets going, it gets going, think I that could really start to bring a ton of a bitcoin onto the network once people realize there's an opportunity here. Do you think that your LSP business is going to be the primary revenue generator for Breez.
Roy Sheinfeld Timestamp: 01:03:27
I don't know if the major, but I think it will be a major revenue stream for us. What we are very successful in is in bringing traffic. So I don't think Breez is the most successful routing node other. There are better routing nodes than Breez, but we are doing very good job in finding the right product fit when it comes to Lightning. Even if we won't be able to monetize our LSP directly, we'll be able to monetize the traffic that we drive through cooperation with other LSPs. So it's either that your LSPs or they will execute payments through other LSPs. But then we'll have like a repair partnership model with the other LSPs where we take a cut because we provide the traffic. So I think that's where we headed when it comes to the business model because I don't want the vendor lock. I do believe in free market and I do believe in standard, and I do want to give everyone to participate in the Lightning economy. I think we need to keep the barrier of entry very low, but we do want to interact with other species and so we need to find some other means to monetize the traffic. I think the way to monetize other traffic that is not going to write directly through our LSP is through partnership with third party LSP.
Kevin Rooke Timestamp: 01:05:10
Right, that makes sense.
Roy Sheinfeld Timestamp: 01:05:11
If that makes sense.
Kevin Rooke Timestamp: 01:05:12
Okay, I know we're running out of time, but I want to get to some listener questions. I do this new segment called the Lightning Round where listeners can send in their questions. I'm going to pick one of the questions to be added to the show splits, which is going to be pretty cool. Are you ready for the Lightning Round?
Roy Sheinfeld Timestamp: 01:05:28
Yes.
Kevin Rooke Timestamp: 01:05:29
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Roy Sheinfeld Timestamp: 01:06:02
Let's go.
Kevin Rooke Timestamp: 01:06:02
First one, we have a comment that came in from Floydian Slips on Fountain and says, is there any chance there will be a way to purchase bitcoin and Breez, skip the middleman and make the transition easier for new users, if possible. What about non KYC?
Roy Sheinfeld Timestamp: 01:06:19
Yeah, so Breez doesn't touch the Fiat economy because we don't want to do KYC AML, naturally. But we do have a partnership with Moon Pay, so you can actually buy bitcoin already in Breez using the Moon Pay interface, and we take care of all the stuff behind the scenes, meaning we swap the bitcoins that you've purchased via Moon Pay we swap it to your Lightning balance so we have that already. I'm open to other fiat on ramps. I think fiat on ramps are important. We support Moon Pay because Moon Pay is currently available almost in all territories. Like their global footprint is the vastness from all the fiat on rampers. And I think they provide a very good, clean, solid service with like KYC. I don't see a future where you can buy Bitcoin without KYC. Sadly, I won't provide the solution to that. I'm not a magician.
Kevin Rooke Timestamp: 01:07:34
Right. Jeffrey asks, is there an adoption level target that you feel like the Lightning Network needs to hit to be able to sustain business models like Breez? And he's using examples of like, is that adoption level a certain number of app downloads? Is it a certain number of public capacity? Number of channels on the Lightning Network? What level target needs to be reached before Breez can be sustainable?
Roy Sheinfeld Timestamp: 01:08:00
Great question, Jeffrey. Right? Yeah, that's a great question. We measure transactions. That's the metric that we use. So we take a cut because as you said, we're in the LSP business. Every transaction that is being routed through our LSP, we take a fraction of it using routing fees. So that's what we measure. Breez is currently between 200k 300K transaction a month, which is nice. It at least covers the operation cost of Breez. It doesn't cover salaries, but it covers the node infrastructure. It covers the channel management and everything that comes down to the node operation. We're there. We weren't there when we were in the ten k order of magnitude, but when we jumped up in an order of magnitude, we go into a sustainable business, but not profit, because profitable. Yet in order to be profitable, which I think is key, because we are here to make money, because money is a reflection of the value that we bring to the world, I think we need to jump in another order of magnitude. So I think millions of transactions a month will create a profitable business for Breez. And I think we have to think about the next level and how we get to the next level.
Kevin Rooke Timestamp: 01:09:41
That's really interesting. Okay, another question came in from Renee Picard on Twitter. And Renee says, how should routing nodes allocate liquidity? For example, should there just be one large node, several small ones? How many channels? What size of channels? Which peers fee settings? Just trying to get an overview of how around should allocate liquidity?
Roy Sheinfeld Timestamp: 01:10:07
Okay, that's a softball from Rene. I see. By the way, I could destroy Renee on all the work that he is doing with routing algorithms. I think he's doing an amazing job on that front. The theoretical aspects of how to optimize routing is crucial to the success of Lightning. And I think Renee is doing an amazing work leading the charge when it comes to that. So thank you so much, Renee. To answer your question, I think node management is still an art. So what we do, Edwards, we try to analyze what are our popular destinations, and we try to analyze our failures. So every time a payment fails in Breez, you have an option to send us a failure report so we'll know the destination that you tried to send to. And based on that report, and based on the traffic that we see in Breez, we constantly optimizing our liquidity with the various channels. But currently we do that manually on a day to day basis. So I don't have a good answer, like, install this tool, set it to disconfiguration in your all set. That's really not the case. The case is to be constantly optimizing, constantly monitoring your liquidity, what are the popular destinations and allocate liquidity accordingly? We have an advantage because we're not a simple routing node. We also have a front end application. We have an advantage where we get more insights from our users that allow us to do that more seamlessly than other routing nodes.
Kevin Rooke Timestamp: 01:12:17
I like it. I see you have a big bookshelf back there on video. Are there any books that have meaningfully changed your life or your view of the world?
Roy Sheinfeld Timestamp: 01:12:34
I have a confession. I haven't read any bitcoin books besides the Satoshi's White paper. And all the books that you see on my shelf are fiction, so I'm not really into nonfiction reading, so I think all the books that I'm reading changed my life, to be honest. I think it allowed me to view the world differently and get out of my head, kind of.
Kevin Rooke Timestamp: 01:13:11
Any fiction favorite?
Roy Sheinfeld Timestamp: 01:13:14
Fiction favorites? I like John le Carré a lot. I like Jo Nesbø. I like detectives in general.
Kevin Rooke Timestamp: 01:13:27
Interesting.
Roy Sheinfeld Timestamp: 01:13:29
Hemingway. I like it as well.
Kevin Rooke Timestamp: 01:13:32
Nice. If you have to hold one asset for the next decade, and it couldn't be bitcoin, which asset would you hold?
Roy Sheinfeld Timestamp: 01:13:48
I don't know. What do you hold? Except bitcoin?
Kevin Rooke Timestamp: 01:13:52
Yeah. If you pick one asset for the next decade, you have to hold on to it all your life savings. Yeah.
Roy Sheinfeld Timestamp: 01:13:57
I'm asking you, Kevin, what do you hold besides bitcoin? Because I only hold bitcoin. I don't know, what else can I hold? I think everything else. Just spend it and live your life. If you want to hold an asset, just hold bitcoin. I don't have sorry.
Kevin Rooke Timestamp: 01:14:12
Yeah, I mean, it's a hard question.
Roy Sheinfeld Timestamp: 01:14:15
It's an extremely hard question. I don't know. I don't think there's anything worth holding.
Kevin Rooke Timestamp: 01:14:21
Yeah, I asked Alex Leachman this last week, and his answer was if he couldn't hold bitcoin, it would be real estate and Apple stock. If I were to answer this question, I might have included Tesla stock. If we were talking in 2019, that was something that I was very excited about, and they've seen a big run up.
Roy Sheinfeld Timestamp: 01:14:48
Now, I hate Apple, so I can't recommend holding Apple stocks. I can't hold the stocks that to companies that don't, like, share my values. And if you see a big cooperation that empowers people's freedom, let me know and I hold our stocks. Up until now, I didn't find anything worth holding when it comes to the corporation, including Tesla. Sorry.
Kevin Rooke Timestamp: 01:15:26
That's fair. One final question for you. Bitcoiners have a saying, and I think this started probably with Michael Sailor, that bitcoin is hope. When you think about the future of the world, what do you hope that Bitcoin will accomplish?
Roy Sheinfeld Timestamp: 01:15:49
Great question. I do understand the saying because I think Bitcoin does provide hope. People don't realize, and I think that's what people need. I think in the Bitcoin ecosystem, a lot of people do realize that, but I think the general public doesn't understand that what is going on right now in the world, that people are trying to force their morality on others using the monetary system. All the do's and don'ts are being enforced using monetary systems. It's the instrument that the states and the countries have in order to force users, force citizens and force people to act in a specific manner that they choose. And I think we need to rebel against that. So for me, Bitcoin is hope because Bitcoin provides an alternative monetary system that doesn't forces you to act in a specific manner. You control your destiny, you control your money. You can do whatever you like with your bitcoins. You can't say that about Fiat. I can't go to my bank now, right now and take out literally, I can't do that. I can't go to my bank right now and take my money out just because I want to. I can't do that. They will ask me why I want to take out my money and if they want my answer to the why, they won't allow me to take my money out of the bank. So my hope is that Bitcoin will replace Fiat and we will have an alternative monetary system where every person in the world is controlling his own destiny and is being effectively their own bank and they can use their money in the way that they see fit.
Kevin Rooke Timestamp: 01:17:50
I like that answer. Thank you so much for taking the time today. This was really insightful conversation. I enjoyed it. I'm sure all listeners will as well. Where can listeners go to learn more about you and the work you're doing at Breez?
Roy Sheinfeld Timestamp: 01:18:04
I think the best source would be my Medium publication. medium.com/breez-technology. I think that's the Medium publication. You can find all the links on our site, Breez Technology. You can follow us on Twitter. And what we would absolutely love if you take a look at our GitHub repository. Bridge is completely open source. All the stuff that we're doing is open source. So take a look at our GitHub contribute. Ask if you can contribute, how you can contribute. We will welcome you with open arms to the Breez community.
Kevin Rooke Timestamp: 01:18:50
Awesome. Thank you so much for taking the time and I hope we can do it again soon.
Roy Sheinfeld Timestamp: 01:18:54
Thank you so much, Kevin. Thank you.
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