Relai Bitcoin Session #4 with Oliver Gugger

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Oliver Gugger was a guest today for our Relai Bitcoin Session. He is an ingenious software engineer working mainly on Bitcoin and specifically
on developing the Lightning network at Lightning Labs.

You can watch it on YouTube

… or listen to it on podbean.


Oliver Gugger is an ingenious software engineer working mainly on Bitcoin and specifically on developing the Lightning network at Lightning Labs. He got into Bitcoin & Lightning around three years ago when he was working at one of the coolest Swiss software development agencies Puzzle ITC (partners & investors of Relai) on several Bitcoin/Lightning projects. His mission is to make Bitcoin globally scalable and useful even for very small transactions like buying an article online for a couple of cents (or sats). That’s why he’s helping to develop the Lightning Network, which is a second layer technology to Bitcoin which will potentially help the Bitcoin Network to process up to 1’000’000 transactions per second (now we’re at 7 transactions per second).

For Oliver personally, Bitcoin means a lot. Since he has fallen down the rabbit whole, it is a real passion for him, personally as well as professionally. He dedicates most of his time to researching and working on this topic (Bitcoin & Lightning). Oliver genuinely believes that Bitcoin is one of the rare shots we get in our generation to really have a positive change and impact to our financial system and therefore to society as a whole.

Some people argue that payments via credit cards and/or the traditional banking system are way more efficient, faster, cheaper, and more scalable currently than Bitcoin. They are right, says Oliver. But there are different perspectives on that. For merchants, for example, it’s rather a hassle to integrate and accept credit card payments, as they pay high fees (2-3%) and only finally receive their money after 60-90 days. If we could make Bitcoin fast and cheap, merchants would be the first to accept it because they would save almost all the credit card fees and receive their money immediately. That’s exactly the vision he is working on with the Lightning Network. In Oliver’s opinion, Bitcoin can easily overtake credit cards as a payment system, but it is going to take a while because the technology (both Bitcoin and Lightning) is still at a very early stage. 

Close systems like the banking system are growing linearly. Open systems like Bitcoin and Lightning are growing exponentially because everyone can participate and contribute. Bitcoiners tend to say “gradually at first, and then very suddenly”. In a few years, we will look back and wonder where this all came from, we’re now close to the “suddenly” phase in Oliver’s view.

Oliver defines the Lightning Network as a means to make Bitcoin way faster and cheaper to use in a completely trustless and synchronous way. It involves smart contracts on the Bitcoin base layer and payment channels that act like Bitcoin debit accounts (second layer) to the Bitcoin savings accounts (base layer). It’s basically a technology tool to give your Bitcoin wings. Once it is set up, you can pay anyone on the network immediately. It is comparable to TCP/IP for the internet. Lightning is a payment network that routs your payments through different nodes in the network in an extremely efficient way. The goal of it is to make sending money as fast and frictionless as sending information on the internet.

It is still going to take a few years until Lightning and therefore Bitcoin will reach mass adoption. That said, the current economic circumstances, like the FED printing loads of money targeting a 2% inflation rate, could accelerate the process significantly. Oliver also sees people directly onboarding to Lightning without even using the Bitcoin main chain at all in the near future. It will feel like a normal thing in a couple of years. Like people are using the internet without knowing what the TCP/IP protocol is, they will soon use Bitcoin without knowing what Lightning or other second (or even third, fourth) layer technologies are.

Failure is always an option in every project, especially in the software space. Nevertheless, Oliver is very optimistic about the development of the Lightning Network succeeding. Based on the insights he has from working at Lightning Labs, he knows that it is already working and many institutions and individuals are actually using it. Lightning also has a very big head start against other scaling solutions which all still have a lot of development ahead of them. Also, from a usage point of view, the Lightning Network has a big head start and is very active: more than 1’000 Bitcoins (+$10 Mio) are currently stored and used on Lightning.

Everybody can run his own Lightning node by setting up a Bitcoin full node and connect LND (a Lightning Lab service) to it. But normal users can also just use a Lightning wallet where they don’t have to take care of all of this themselves. There aren’t that many Bitcoin wallets out there that work with Lightning yet, though. The reason for this is simply that most of them are mobile apps, and for them it was so far hard to interact with Bitcoin full nodes and Lightning nodes because there is a lot of communication with the blockchain going on. But there are solutions (like Nutrino, another Lightnings Labs service) for that on the horizon. The only missing piece is that a normal Bitcoin full node on the internet can serve people that are using mobile phones. Solutions for this are being developed and rolled out currently. The trickiest parts are usually the regulatory ones, because there is some sort of custody / third party access to user funds involved with Lightning. It’s more likely that highly regulated Bitcoin financial service providers like exchanges and brokers are going to integrate Lightning, and then let customer facing apps like Relai use their infrastructure to design very intuitive and user-friendly user experiences on top of it.

The biggest challenge for Lightning currently is usability. There is so much technical complexity to hide for the end user, but this is ongoing development and many players are working in it, so it’s more a matter of time until we get to nice “one-klick solutions” to use Lightning. Also, the privacy topic is still a big challenge as recent research papers have pointed out that the privacy on Lightning is not as far as it should be, but there’s also a lot of work going on in that regards.

Last but not least, how much of Oliver’s wealth lies in Bitcoin? Maybe a bit too much, he says. That’s why his savings suffered a bit in the recent Bitcoin winter. His conviction is still very high though, and so are his Bitcoin holdings. He calls it “a good amount” without saying anything about a concrete percentage.

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