Original author: 0x Cousin, IOBC Capital
In the first half of this year, the innovative narratives in the Bitcoin ecosystem, such as BRC 20, Ordinals NFT, Bitcoin Layer 2, have become one of the main topics in the industry. More and more people are starting to pay attention to the development of the Bitcoin ecosystem. In the article "Narrative Innovation: An Analysis of Recent Bitcoin Ecosystem Experiments", we outlined the development status of BRC 20, Ordinals NFT, and several leading Bitcoin Layer 2.
Regarding the development path of Bitcoin, the Bitcoin community has experienced ideological struggles more than once. In the process of divergent development, a great opportunity is gradually emerging in the Bitcoin ecosystem: decentralized social payments combining Lightning Network and Nostr.
The Origin of Lightning Network - Scalability Debate (Layer 2 Scalability VS Layer 1 Big Block Scalability)
The block size of the Bitcoin network is designed to be 1 MB, with 1 block generated every 10 minutes. In a situation where the amount of transaction code is roughly the same, the Bitcoin network can handle about 7 transactions per second. This cannot meet the demands of a large number of business transactions, especially during bull markets with active on-chain trading. Therefore, as early as 2015, there were voices for scalability in the Bitcoin community.
Regarding the choice of scalability technical path, the Bitcoin community has divergent opinions:
1. Radical miners: Support increasing transaction capacity through Layer 1 big block scalability
Some radical miners chose Layer 1 block expansion. Before the SegWit upgrade at block height 478558, a hard fork resulted in Bitcoin Cash.
2. Conservative developer community: Advocating for Layer 1 technology upgrade + Layer 2 scaling
Bitcoin Core, represented by the Bitcoin Core development team, advocates for maintaining Bitcoin's pure "non-sovereign asset" attributes by only implementing conservative technical upgrades at Layer 1 (SegWit segregated witness) and expanding Bitcoin's use cases through Layer 2 off-chain scaling (Lightning Network).
In August 2017, Bitcoin underwent the SegWit upgrade. As transaction data is packed into blocks and digital signature information is stored in the Extended Block, the current Bitcoin block size is mostly around 1.5MB (theoretical "4x" scaling is achievable, with 1MB for transaction data and 3MB for digital signatures). This allows for more transactions per block, achieving a certain degree of Layer 1 scaling. In March 2018, Lightning Network went live, enabling fast off-chain scaling of Bitcoin's payment network through state channels.
Thus, a combination scaling solution of Layer 1 technical upgrade advocated by Bitcoin Core and Layer 2 off-chain scaling through the Lightning Network has been implemented to some extent. Upholding the value proposition of "Bitcoin as digital gold, Lightning Network for instant payments".
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After a complete cycle, the Lightning Network has gained 18,000 Nodes, running over 70,000 Channels, with more than 5,400 BTC in the Lightning Network. In addition to the Lightning Network, there have been multiple Bitcoin Layer 2 solutions such as Stacks Network, Rootstock, and Liquid Network. Bitcoin Cash also underwent a fork and split into BSV in November 2018.
The problem with the Lightning Network is that the payment functionality is not well-suited for a large number of independent dApps, but rather for embedding into other dApps to serve its purpose of fast and small transactions. Particularly, social applications are the most suitable platforms for integrating the Lightning Network.
Social payment: Integration of Nostr with the Lightning Network
Because fiatjaf, the developer of Nostr, is also a developer of the Lightning Network, Nostr natively supports the Lightning Network.
Nostr is a non-blockchain, minimalist social protocol that provides an uncensored global social network. Nostr transmits notes and other stuff through relays. It does not rely on any centralized servers, so the publication and transmission of information are censorship-resistant. Users can create public and private keys, giving them freedom from third-party server limitations.
In terms of user experience, Damus, a social network based on Nostr, offers similar features to Twitter. Users can create posts (like tweets), like posts, follow or unfollow someone, and retweet, among other functions.
If you want to use Nostr, you need to run a Client, which can be a Native Client or a Web Client. When a user wants to publish some content, they need to first edit the content, then sign it with a key, and then send it to multiple Relays. The Relays are responsible for broadcasting the content published by the user. Anyone can run a Relay, and the Relay only needs to accept posts from users connected to that Relay and then forward them to others. Users do not need to trust the Relays because the users sign and verify the content in the Client.
The most popular Nostr client, Damus, has built-in Bitcoin Lightning Network payment functionality. Users only need to enter the Nostr Public Key to directly use the Lightning Network payment Relay for a one-time fee. After payment, they will receive a Bitcoin Lightning Invoice.
The design concept of Nostr is somewhat similar to the Bitcoin Network. Developers create various Clients for users to choose from. The Clients are used to sign and verify information. The Relays are responsible for fetching, storing, and transmitting information from the connected Clients and forwarding it to other Clients. There are also many Relays. Users only need to create a pair of public and private keys to use Nostr without any admission requirements. It is somewhat similar to the Bitcoin community's developer team, mining community, and users. Each component is designed to be robust and resistant to censorship.
According to Nostr.Band, there are currently over 23 million Pubkeys, with over 3.6 million accounts having personal profiles and over 170,000 accounts having Lightning Network addresses. There are 1,644 Relays, and over 100 million Events have occurred.
The Crypto community's main concern about Nostr is the lack of incentives for Relay. If Relay has token incentives, most of the tokens may end up in the hands of a few people, making it ineffective as an incentive and vulnerable to attacks. On the other hand, if Relay has no token incentives, there may be no sustained motivation to store user data, and there is also the possibility of Relay actively or passively deleting data.
A possible solution is to set up an AI Bot as Nostr's Relay, responsible for fetching, storing, and transmitting information from any connected client, and forwarding it to other clients. AI, being more neutral than humans, does not filter out user content based on personal preferences or accidentally. Additionally, a Lightning Network address can be set up to charge users. New users would need to pay a one-time fee in BTC to use the Relay. The BTC collected by the AI Relay would cover operational costs.
The combination of Nostr and the Lightning Network sets a precedent for native integration between social applications and Bitcoin. In the future, there may be more social applications integrating with Bitcoin (Lightning Network), and perhaps DeSo, a Mass Adoption platform, will lead the way in the integration with the Bitcoin Lightning Network.
Summary
The decentralized payment system of Bitcoin, with its low barriers to entry and financial inclusivity, combined with the fast payment capabilities of the Lightning Network, have unparalleled advantages in decentralized social payments and even in AI applications.
