Episode 173 - Hannah Rosenberg

You're listening to the only place on the internet that offers the perfect blend of high quality premium cigars and cryptocurrency news and commentary. Welcome to cigars and crypto. Now here's your host, Invest Noir. Good evening ladies and gentlemen, welcome to this episode of cigars and crypto. I'm good today. Thank you. Thank you so much for joining me. I do not like to mix words. I like

to always jump right in before I, you know, ask my question. So Hannah, tell me about yourself. How did you get into crypto? Yeah, I got into crypto a while ago. So I studied economics at UIC in Chicago and developed an interest in monetary theory and, you know, obviously economics, specifically, specifically monetary theory and was just listening to one of my favorite podcasts. I was a

it. And once I grasped the whole decentralization thing, I was just in love. I was a big tech nerd, right? I've always been a big tech nerd. And so I was working in tech at that time. And, you know, this is just the combination of monetary theory and technology. And so I was just completely in love. And have been, you know, working with or playing with

or, you know, being part of the crypto community ever since. Yes, about mid 2012. I don't write in. Awesome. You know, everyone has a very unique story for how. They find the road, but all roads lead to Bitcoin. And for me, it was kind of a long sorted, twisty, windy, dangerous road. To get to where I am right now, you know, right, right. He's simply dangerous.

I've been hacked before. I have. I have lost hard drives with Bitcoin on them. So many. Yeah. I've just I used to run the Bitcoin meetups in Chicago and talked to all kind of, you know, crypto people. And after a couple of beers, you hear everyone's stories of lots. Wow. Are there a lot of them, yeah. Right. Right. You know. So many. But you know what

though? I think that's a lot of people who are really interested in Bitcoin. I think these are valuable lessons learned. You can't be in this space for a very long time. Be knowledgeable and be seasoned without war wounds and battle scars. Well, this is just such new stuff. And it's so experimental that pretty much if you're on the field, if you're out there doing it, you're

going to get a few scars and bumps in the process. Exactly. Exactly. So we should all be proud of our crypto war stories. Although some of them are still paying for it. Indeed. Indeed. They heard so bad. Yeah. Yeah. Now, you know, I want to get to why I invited you here. And I'm so happy that you accepted my invitation. I am able to tell people

about mining because I got into the space as a minor. I am able to tell people about dollar cost averaging. I am able to tell people about investing and trading. But I know nothing. I'm not going to get to the point. About the lightning network. Well, let's fix that. Yes. Yes. That is what I'm here for. Can you give me explain the lightning network to me

like a five year old. Please. Okay. Well, I always like to start with sort of when trying to explain something. I think it's very helpful to start with, you know, the problem that the thing solves, right? So we can kind of understand how it came about in the first place. And you know, Bitcoin has scaling problems. It's just the, you know, due to the architecture of

it, everyone in the world has to know about everything, you know, if I buy a cup of coffee, you know, I just moved to Puerto Rico. It's lovely. But I used to be in Chicago. If I bought a cup of coffee at the cafe down the street using Bitcoin, every Bitcoin node in the world would need to know about that transaction. So it's just this fundamental

architecture issue where it's hard to scale. And of course, if, you know, anyone who's in a crypto, you know, you know, you know, there were so many different debates on this. It's exhausting. I don't feel like going into it again. Basically, the crypto Bitcoin had to scale in some fashion. And one solution out there is something we call the lightning network. And it's a, you call

a second layer solution. There are a number of different ways to do it. But the specific one here is the lightning network. And kind of the idea that makes this work is you, you architect it in such a way that when you do a transaction, you only need to be local information, right? So if I were to go to my local cafe and buy, you know,

a cup of green tea, using the lightning network, well, you know, I would have to know about it. They would have to know about it. Maybe a couple of nodes, you know, that were involved in that transaction, which we'll get into in a second. It's like they might need to know about it. But that's it. Right. So you can do local knowledge, which is a huge

help for scaling Bitcoin. You don't have to have everyone in the world knowing about everything. So how it actually works is because I think there winds up being some confusion where people think that lightning is an altcoin or a sidechain or something of that sort. It's actually everything that happens on lightning are entirely valid real Bitcoin transactions. It's essentially like instead of handing someone cash, you

would write them, you know, for those of us who are old enough, to know this reference, right? You would write a check, but you would sign it, write a check, sign it and give it to someone, but they would just hold on to it rather than take it to the bank. So you can kind of think of one analogy, you know, of course, all analogies are

flawed, but hopefully this one is helpful. And one analogy is that, you know, Bitcoin, the main blockchain is like that bank. Of course, Bitcoin's not all like a bank, but you know, is that settlement layer. And then what we're doing on lightning is just writing each other checks and kind of passing them around, you know, instead of taking them directly to the bank, you kind of

think of it also as like writing someone, in IOU, but it's not in IOU, it's the real Bitcoin transaction. And what this allows is for all these transactions to happen just between individuals or between, you know, different groups of individuals without having to tell the main chain about it. And so you can do so. So many more transactions, you can do them at dramatically lower fees,

you can do them instantly, you don't have to wait. Once you're set up on the lightning network, you don't have to wait for any confirmations on the main Bitcoin blockchain. But because these are real Bitcoin transactions, you can do this all in a trustless way. So if anything ever goes wrong, someone disappears, someone runs off, etc. You can take that check they gave you and go

cash it right go take that transaction they gave you on lightning network and put it on the main chain. So in this way, the Bitcoin main chain kind of serves as the settlement layer, the security layer for the lightning network. So stop there and make sure that made sense. Yes, it did. Now, I have to admit, I am as old as I'm older, much older than

the reference that you gave about the check. So I'm just going to go ahead, put myself out there really quickly. It's okay. You can cloud. But as I understand this, I used to own it. I was a brick and mortar store behind my alma mater, shot out to Delaware State University. And it was a brick fix computer shop. And the students would come in and would

ask me to upgrade their hard drives, their memory. Sometimes they need a motherboard replacements. The USB drives will break and don't have to solder new ones on or they needed an LCD replacement because they dropped it. And I was like, I'm going to go back to the computer shop. These kids would pay me in a variety of methods. And for the ones that paid me in

cash or mommy or daddy wrote out a check to me, I would put those in an envelope that had a lock on it. And I would take that envelope at the end of the day and I would go to the bank with a deposit slip. And I would drop that envelope off at the bank. And then the bank would settle those checks in the cash for

me into my accounts. I understand. And the lightning network to function similarly, is that correct? That is correct. But it's even cooler than your example there because there's no need to go settle at the bank. You only settle at the bank. If something went wrong in that situation, or if you, you know, maybe if you wanted to move some funds around from here there or whatever.

But in general, like, you could just hold on to it and then use that cash, those checks, etc, to go make your own transactions with other people. They can even be like divisible, you know. So it's a more flexible than that. But yeah, that's fairly accurate analogy. Yeah. Okay. All right. So I like to deconstruct things and I like to break things down. My favorite saying

is, explain it to me like a five year old. So let's, let's break this up into little chunks. Okay. One of the things that you said that resonates with me are nodes. I am familiar with what nodes are because I have multiple full nodes in my account. So now it takes days, but to have all of the transactions in or on your computer is running a

full node. Do I have to have all of the transactions to operate a lightning node? Not necessarily. So any lightning node definitely needs to be connected to a Bitcoin node. And of course, it's good. You bring up the word node. When we say that, we just mean computer or sometimes mobile phone or basically any internet connected electronic device that is, you know, running the Bitcoin software

or the lightning software. But lightning absolutely has to be able to talk to a Bitcoin node. You can set it up in different ways. So maybe you have a, you know, something on your phone that's very lightweight, but then connects to a node somewhere else. A node every like lightning wallet has to be connected to a Bitcoin node in some fashion. Okay. All right. Now we're

getting somewhere. I'm starting to understand this. So you mentioned that lightning nodes will also work with pruned nodes. And I'm assuming that that's just so that it can write to the blockchain. If you need to cash to check. Right. Going back to your old analogy. Okay. Great. So. If I wanted to have a lightning node. Where would I get started? Yeah. How would I do that?

It depends entirely on what your goals are. So if you were, let's say, that business, that computer repair business. And you wanted to accept also lightning payments from those students that came in. What you, I would recommend setting up something such as BTC pay server. Not sure if you're familiar with that one, but it's a fantastic open source project that acts as like a payment processor

for crypto payments. And they support lightning. And you would need, you know, a server space. And you would set up, you know, it will BTC pay server would set up the nodes for you. So it would set up Bitcoin and lightning for you. And then it would help you to keep a track of your payments. It generates new invoices or QR codes for your customers to

scan, you know, you can use it like a point of sale service. So if you were, you know, you could use it. For a business, I would definitely recommend something like that. If you are, you know, just an enthusiast, you could just download a wallet. Their number of good ones, you know, Phoenix, Moon, you know, all kinds of different wallets out there that you could use

and get on your phone and get set up pretty quickly. My husband is the head of operations at my business, fellas commerce. And he just, you know, I'm going to get a wallet. His dad set up with a moon wallet. And so they just did a little lightning transaction with each other. So it's pretty user friendly. Like you can get it going. Okay. All right. Now

this is now we're getting somewhere because these are the types of questions that I get from my listeners and my followers about the lightning network. Um, so we know that you need a full or pruned node to run the lightning network. We know that you need a lightning node and that you can run it from your phone or from a server using the BTC pay server.

Right. So does it work similarly to Bitcoin? If I wanted to pay for something, is it just as easy as scanning a barcode in or pasting an address that's text that someone text to me text. Is it text or text that you had a text to me? You know what I mean? It just kind of could pace and boom, boom, boom. You're on your way. Yes

and no. So when you get a user friendly wallet. And there is a bit of an onboarding issue with lightning. Is there all is with all new tech just trying to, you know, get someone to go through the steps. But I mean, like the strike wallet. That one's really great for user ease of use. But once you're, you're set up, you know, once you have someone,

you know, if you're, you know, a store or you're a brick and mortar store and you have say a tablet that's, you know, got your point of sale system that's lightning enabled and someone walks into the store to pay you. Then it is a really good user experience. Very, very similar to Bitcoin. You would get a QR code would pop up on your screen. They would

take out their mobile phone, open their wallet, scan the QR code, press send, boom. You're done. Now on the back end, it's the workflow is a little bit different. But for that user experience, it's pretty much the same as a Bitcoin transaction. Yeah. Okay, that's good to know. Now we're definitely getting somewhere because that I think was the biggest question. I spend a lot of time

onboarding cigar smokers to Bitcoin. And because they follow, you know, CNBC or they read financial times or market watch, they always ask me about other projects. So they're always asking me about XRP or ethereum. Or doze or some other project, right? The doors, right, the doors movement. But I tried to really insist that people. Start with Bitcoin. Yes. And it's partially because that's how I got

started. I made the mistake. Don't, don't call me. I made the mistake of thinking that because I was when I first started mining. I was also merged mining name coin. And at the time I said, name coin will be bigger than Bitcoin. And I started buying name coin with Bitcoin in 2015. And wrecked the shit out of myself because I didn't just stick with Bitcoin. So

when I onboard people, I say, look, man, don't play with 80 of that other stuff. And to understand the fundamentals and the basics of I completely agree. And for two reasons. So one from the investing perspective, you know, Bitcoin's the original. It's the biggest. It's most well known. It's got the best network, et cetera. And so just there's so many, you know, I'm not, I'm not

hardcore maximalist. I think they're other coreings that are totally valuable and interesting. But you know, as many coins as there are out there, 98, at least 98% of them are, you know, shit. So it's, I think it's starting off absolutely start with Bitcoin because it's the most solid. We know it's sincere. It's legit, you know, starting there. And then once you really understand it, then dabble

in other things if you like. And also from a technical perspective, when I get, you know, if I'm going to be teaching any technical edges, I think it's going to be a little bit more interesting. So, I think that's a really good example of the kind of education or if I'm just training up some of my own developers, I always have them start with Bitcoin. Because

Bitcoin was the original and everything that came after that is kind of like slight variations off Bitcoin. So once you really understand what Bitcoin is doing, then it's so much easier to understand all the other little variations of it. So we definitely always start with Bitcoin. Yeah. Exactly. Solid advice for solid advice. One financial advice it was just good solid advice. Yeah, yeah. It's not my

name. It's good solid technical advice. You know, but you know also for talking about lightning, I feel I would to be fair here. We should talk about some of the things that are more complicated in lightning than they are in Bitcoin. Yes, let's fall down at rabbit hole. Let's talk liquidity. Yes. That is probably the one that people are most likely to bump into, although there

are other issues as well. So liquidity, liquidity, this is the idea that let's go back to the out of cafe example. I'm in Chicago. I'm at a cafe. Let's say it's Jose's cafe. Right. I walk into Jose's cafe. I'm there every morning buying the same cup of green tea. I like to use crypto. And I'm like, hey, let's save a lot of money on Bitcoin fees,

switching to lightning. And how lightning works. Is it won't get into the technicalities of it, but you set up a channel with someone. So basically, I, I think it's going to be a good idea. You have a direct connection to a particular person or one node, one computer connects to another computer. So I would set up a channel with Jose and every morning when I come

in, then instead of putting a transaction on the Bitcoin network, instead we just do these little, you know, I use you write these little checks and exchange them back and forth. Right. So I come in every morning and write them a check that basically says, yep, I owe you another $4 for that fantastic cup of, you know, that match a lot. Nothing dangerous here, whatever it

was, you know, and give it to him. Now let's say one day, I decide to go to Charlie's Cafe. Instead, I want to pay and lightning, but I don't have a direct connection to Charlie. So what, and I don't want necessarily want to set that up because I'm not planning on being at Charlie's cafe every morning. I'm a neighborhood in Chicago. He might have connections to

lots of other business people around there. So perhaps Jose has a channel set up with Charlie. So when I go in to pay, the user experience would be the same. Charlie would pull up, you know, take his tablet or ever his point of sale is pull up a QR code for me, I take up my wallet, I scan it, the payment gets set. On the back

end, what's actually happening is I'm going, hey, Jose, I'm going to, yeah, I need to give Charlie this for a box, but can I give it to you? And then you give it to Charlie. And by the way, I'll send you $4.00 in two cents, and you get to keep the two cents for your trouble. And because we're not mining this because we're not broadcasting it

on the main chain, this computationally is only as bad as difficult for Jose's computer is say sending a text message. So Jose is like sure I'll send a text message for you for two cents. And so then that that transaction can get routed through to Charlie. Now, that works, right? There was a lot of debate about whether or not this routing system would work. It's been

working for years. It works pretty darn well. But you can sometimes have a problem where perhaps I'm trying to send that payment through to Charlie, but that connection between Charlie and Jose say in that connection, that little pipe that connects them. Perhaps all of the money is on Charlie's side in Jose doesn't have any money to forward to Charlie. So you can have issues like that.

And also when you set up your wallet, you need to make sure that you have liquidity such that you have connections to other people that are going to have connections to others on the network, right? That you're well connected. And that you have a bit of money in all of those pipes that connect you to different people. And that's what we call liquidity problem when you

don't have the right pipes to different people or there isn't enough funds. And there's no funds in those pipes to make that transaction. And this is a current headache on the network. Generally works pretty well. I mean, we did a party a couple years ago in Chicago where we had Jack Mallorz come in. We had the zap wallet and got this nice bar in River North

and Chicago to accept lightning for the day. And all of us came in, you know, with our lightning wall. It's ready and bought drinks all night at the bar and it wasn't, you know, until about 1 a.m. that we were running out of and ran into liquidity problems. So, you know, it really worked pretty well, but it is a problem on the network. There are many

solutions in the works, but it is currently an issue. Yeah. So you said something to me that kind of caught my attention again. Now, as a minor, I know that when I'm mind Bitcoin, I am paid a, I'm paid a portion of a block award when I'm mining in a pool. Right. Yes. As a node owner for the Bitcoin court network, I am not paid anything

for operating a node. Right. But you said that I can make two cents on a four dollar transaction by owning and operating a lightning node. Is that correct? That's right. And, you know, it's numbers vary and it depends on how much you're routing and the value of transactions and all kinds of various different elements to that. But yes, you can make money running a lightning node.

Now, it's not, it would whether or not that's going to be profitable kind of depends on, you know, where you're running your node, how much money you have to in order to move money around between your friends essentially in order to help your friends move money around you have to have money in your node. But if you're already holding on to Bitcoin, right. If you are

ready, you know, you're going to have to move money around. But if you're already holding on to Bitcoin, right. If you are ready, you're going to have to move money around to the Bitcoin, right. If you already have some Bitcoin that you're holding on to, then you can move it into your lightning node and put it to work for you and help your friends provide liquidity

to your friends or your, you know, business associates, wherever you're connected to on the network. Allow them or help them to move funds around and earn small fees in the process. So yes, you can certainly help offset the cost of running a node and perhaps make some money. Yeah. Okay. All right. Now this is this is getting this is getting. It's getting interesting because I remember

a discussion, you know, five, maybe six years ago where the question was, what's going to happen in 2140 when all of the Bitcoin is mind. Yep. And how is the network going to stay afloat? What incentive will people have to use the network? And I feel like being paid transaction fee. Yeah. And these as a node operator could provide that incentive for people to keep the

network up. Now, with that said, I'll be long dead in 2140. Everywhere. Not your problem. Yeah. Right. But the fact that we're thinking about it now and the fact that this is in, this is a solution for that problem is an amazing thing. So, okay. So now my next question is because I know I have some aspiring entrepreneurs that are looking at my network. entrepreneurs out

there. How do I start a lightning node? I have, I have my, I have my full nodes running. I know that I want to start a lightning node. I know that I want to provide liquidity to the network. So I guess, how do I get Bitcoin on the lightning network? Yes. Great question. And I've been working with lightning labs on doing some developer advocacy sort of

stuff, basically helping with this exact problem, helping to make sure that developers who want to get into this, you know, entrepreneurial minded developers who are thinking about lightning network have the resources they need to get started with this. So we just released a video, a couple of days ago, a couple of weeks ago now, on setting up a node. So if you type, you know, like

run LND into YouTube or type, you know, setup lightning node. You should be able to find the video. At the lightning labs YouTube channel. Now I should specify here that lightning labs is a business, but it's the business that makes the LND implementation of lightning. So basically they're helping to write the lightning network to write the protocols for the lightning network and the software that makes

it usable. And I work with them. And if you go to lightning dot engineering, you can find at the top they have documents. And if you click there, you can find all the information. All kinds of guides on what lightning is, step by step instructions on how to set up a node. And they have a YouTube channel, which a lot of stuff is coming out now

on the YouTube channel, a lot of guides, et cetera. So I would definitely send them to those resources. I am biased here a little bit. There are other places to go, but I do love lightning labs and I do work with them. So I think it's a fabulous resource. There's not the wrong wrapping your home. It's all good. It's all good. So Hannah, let me ask

one last question. Where do you see the future of Bitcoin, the lightning network and blockchain technology in the next three to five years? I love this question. And these things are always dangerous, right? Because it's always very possible for us to be wildly wrong, but I'll just go for it here. I'm thinking about this now very much from sort of mostly a technor perspective. I love

lightning largely because I'm very, I really, from a monetary perspective, I would love to see people using crypto. I love lightning because I think it makes that possible. Lightning allows certain types of transactions, you know, certain types of communication and exchange that just otherwise couldn't have existed. So I think lightning's where it's going to be at. And I think what will happen is it will see

in the next three to five years. A big increase in adoption, but I think at least in the first world, it won't so much be you showing up to, you know, Jose's cafe and paying and lightning. It'll be more like lightning's what's running on the back end of some really cool app you're using. And I think that will be in three to five years likely all

of us will have. A lot of us will have some cool new app on their phone that you know we maybe don't even realize is running lightning on the back end. So that's my prediction for adoption and technology. Amazing. Now, Anna, tell folks where we can find you. Yeah, I am on Twitter. I'm just typing Hannah Rosenberg. I think it's at H Michelle Rose. I have

a business called Velis commerce. So Velis Velis commerce.com V L A S commerce.com all the information is there. Or you could know just type me into link. I think I can. If you want to see the full resume. All those various places. Yep. No problem. Ladies and gentlemen, Hannah Rosenberg. Hannah, thank you so much for joining me today. I appreciate it. Thank you. It's fun. Thank

you. Thank you.