Everybody Needs an Uncle Jim

Wallet of Satoshi’s recent decision to discontinue customer service in the U.S. marks a crossroads in the evolution of Lightning as a consumer tool. Wallet of Satoshi has been invaluable in providing everyday users with a reliable, managed, yet functional and reliable tool for micropayments made on the Lightning Network. Departing from service to the United States would leave a huge hole in Lightning’s toolbox for American Bitcoin users.

Management tools aren’t the ideal type of tool, especially for small volumes, but it’s impossible to deny that they have a place in this ecosystem. It’s not for everyone, and certainly not for anything approaching significant sums in my opinion, but it can be useful when users have a good understanding of the risks.

This is just an undeniable fact about Bitcoin. From a purely fair economic perspective, this is an inevitable reality. As demand for block space increases beyond available supply, fees rise. This prices out low-value users and use cases. Would you rather pay a $20 fee to open a $50 or $100 Lightning channel? Most people would say no. That leaves custody.

The problem is twofold. First, you are no longer in charge of your money. The caretakers are the caretakers, and you have no real recourse other than to trust them. If they mess with you, there’s nothing you can do. If you’re lucky, wait and see how things play out in court. Second, there is no privacy whatsoever. Your trustee sees everything: everything you do with your money, every payment you receive, every payment you send. The more fees rise, the more people will make this compromise out of sheer economic pressure.

The real solution to this problem would be to add some form of restrictive contracts to Bitcoin. Without that, the answer to the problem is simply to introduce trust in the form of some entity co-signing a transaction, becoming a member of a federation that governs a coin, or some other relationship where people use a service or protocol. To be honest you have to trust some operators.

Honestly, it’s annoying. Regulators will continue to make more demands for information from those custodians and more demands for limits on what users can do with their money, and they won’t stop. Short of actually enabling commitments in Bitcoin, what can we do?

Create more janitors. PLEBNET is a mess in terms of privacy issues and not really profitable in terms of business, but it has shown that many relatively non-technical Bitcoiners can actually run a full Lightning node if they put in the time. They helped each other find people to peer with and open channels, helped troubleshoot technical issues, and ensured that people maintained relatively high uptime for their nodes. They showed that it is possible.

Who do you trust more with your money? Is it a huge, faceless corporation with arbitrary regulations and no ability to evade it, or is it someone you have known personally for years, such as a close friend or family member? Personally, I trust faceless giant corporations more (just kidding).

Lightning currently has many issues that need to be addressed that require either an as-yet-unknown original design or a consensus change to Bitcoin. This is why things like Wallet of Satoshi have become so popular. All these problems are solved through economies of scale. It can be expensive and uneconomical for one user to manage a channel just for himself, but for many users piggybacking on his node, it becomes very cheap and economical for one person to manage a channel on a per-user basis.

So let’s do it in a more decentralized way. It’s obviously not as cheap and cost-effective as a larger service like Wallet of Satoshi, but having a group of friends, family, and your wider social circle all sharing a single Lightning node makes it cost-effective enough to be practical if privately owned. Self-managed channels do not. There are already many tools for this today. There are probably many more tools out there that I don’t even know about: LNBits, LNDHub, Cashu, Fedimint, etc. Software that does this now exists. Cashu and Fedimint also allow this to be done in a privacy-preserving manner, with operators having no idea which users are sending which payments.

Governments can easily run large-scale operations like Wallet of Satoshi to enforce regulations, but what about thousands of people all running small Lightning nodes, serving a dozen or so close friends and family? It’s not practical at scale. It would also seem completely absurd and ridiculous from a public perception perspective. Is kicking down Uncle Jim’s door because her grandmother allowed him to send and receive payments using Lightning nodes because if she did things on her own, things would inevitably screw up and she’d lose all her money? Outside of the headlines the media pours out, think about how the general public, who have no interest or idea about Bitcoin, would perceive this.

Lightning’s current reality remains the same. You are not ready for self-storage at scale unless you pay higher economic costs and deal with added technical complexity. This will change over time, but for now, this is the situation. Although more complicated than downloading a wallet like Phoenix or Breez, PLEBNET has shown that it is absolutely possible for expert power users to run a full Lightning node. You don’t need to be a developer to use it. Additionally, boxed node solutions like Citadel and Umbrel have implemented plug-and-play and both support the LN bit in their app stores.

Satoshi’s Wallet, which is discontinuing service in the US, is terrible, and was a very useful app that smoothed out the rough edges of the current state of Lightning without requiring invasive information collection to use it. This will certainly create a hole for US Bitcoin users. Uncle Jim can step in and fill that hole.

This is a guest post by Shinobi. The opinions expressed are solely personal and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.