The Future of Payments
How Bitcoin, Lightning Network, and Lightning Address are revolutionizing finance in previously unimaginable ways
If money is to be digital, instantaneous, and global, then it must also be interoperable.
This is not our reality. We live in a non-interoperable financial world. A world where global wire transfers between banks get stuck for over 3 weeks. A world where fintechs and neobanks promise interoperability but give you more proprietary APIs. A world where we can’t send money from Cash App to Revolut.
It is 2022, and we must do better.
What if there was another way? What if the payment rails were instead built on money that was inherently interoperable at the base layer? What if users enjoyed fee-less, instantaneous transactions with one another on a global scale, regardless of provider choice?
The future of payments must be built on true global interoperability across users and providers that rely on the same base money - Bitcoin.
This is a multi-part series on how Bitcoin, Lightning Network, and Lightning Address are making money truly interoperable on the web stack. We explore ZEBEDEE product work that begins to address these issues in a Bitcoin-first financial world.
Fiat providers lack user interoperability
There’s an illusion that exists about interoperability between banks, fintechs, and money service businesses around the world. It may seem trivial to have two banking providers that speak the same money language be able to transact with one another seamlessly.
But like I said, that’s all an illusion.
In reality, banking partners that speak the same money language maintain vastly different technical standards and are thus not truly interoperable. This lack of standardization debases one of money’s most important properties — its ability to be freely transferred between any two parties.
Although both Cash App and Revolut understand the same money language of the US dollar and can freely transact with one another at the institutional level, their users aren’t afforded this luxury. Whether one is a user of HSBC or Chase, sending money to a user of Venmo or PayPal is virtually impossible. Transferring funds across providers has always been a laborious and expensive endeavor for end users.
Have you ever actually tried sending from your Cash App account to your Revolut account? Why can’t you?
One of the primary reasons why Cash App users can’t easily send money to Revolut users (or vice versa) is that an open permissionless global US dollar network standard that any participant can connect to does not exist. Cash App has its integrations with tradfi banking partners, and Revolut has different ones. This is the same for all banks, fintechs, and neobanks that rely on any fiat currency as their base money.
While there have been advancements in certain regions of the world to standardize inter-banking systems such as Open Banking/PSD2 in the EU and Zelle in the US, these systems are inherently not interoperable with one another and depend entirely on fiat currencies that themselves aren’t global in nature - e.g. a US bank still wouldn’t simply be compatible with an EU bank account.
The majority of these providers’ systems and APIs are still fully closed source, proprietary, and share little in common standards. This leads to lots of fragmentation and segmentation of our financial infrastructure world, a world marred by years-long banking partnership integrations that yield little-to-no substantial improvement in user experience across non-interoperable financial service providers.
Thankfully Bitcoin exists
Just like the internet turned information into data, Bitcoin turns value into data. Value that can be transferred, programmed, and reconciled by anyone in the network with true finality in a real-time fashion. Did I mention Bitcoin is global?
Also just like the internet, Bitcoin’s use cases and capabilities will only continue to expand as years go by. Those working on the early stages of internet infrastructure certainly did not envision a future where kids would be playing computer video games at 8K HD video definition directly from a server machine located in a different continent.
We’re still at the very early stages of what true digital sound money will achieve for society.
If you’ve never made a Bitcoin payment over the Lightning Network, I highly encourage you to take a minute here and do so. I recommend the ZEBEDEE App to get started.
One of Bitcoin’s strongest value propositions is that it is permissionless.
Akin to using the internet, there are countless ways of using Bitcoin. You can hold some coins in a hardware wallet for savings purposes, you can run your own bank by hosting and managing a full Bitcoin node stack at home, or you can rely on service providers to send and receive Bitcoin payments on your behalf. The choice is entirely up to the user. There’s no one dictating you must do X or Y with your Bitcoin. Don’t listen to those saying you can never spend your Bitcoin, or that it must only be used for savings in cold storage.
Bitcoin is a permissionless money system. It is to you whatever you think it is.
That being said, Bitcoin and Lightning Network, Bitcoin’s Layer-2 payments technology, are standardized technical protocols which require participants of the networks to interact with one another in specific ways.
Bitcoin Lightning payment interactivity
Let’s walk through a current user payment scenario with Alice and Bob. When Alice wants to pay Bob in Bitcoin, it would be expected (and necessary) for Alice to ask Bob for a Bitcoin address such that she can then send a transaction to the desired destination (note: onchain address reuse is discouraged for privacy-preserving purposes). The same can be said about this interaction if performed over Bitcoin’s Lightning Network. Alice needs to ask Bob for a Lightning payment request such that she can attempt to make a payment against it.
Not only do these payments require active interaction between the two involved parties, but a Bitcoin address or Lightning invoice can be daunting to those less-technical Bitcoin users.
While interactive payments like these are great for some types of transactions, such as buying coffee at the store or checking out from an e-commerce website where a single-use time-expiring payment request is created for the sole purpose of that one payment, it doesn’t cover all use cases, especially not those in asynchronous and on-demand scenarios.
What if there was a way to programmatically and automatically request a new payment code from Bob, instead of Alice asking for one every time?
LNURL → LN + URL → Lightning + Web
LNURL brings Lightning Network invoices to the web layer (think apps, websites, servers) in a standardized manner such that interoperability between providers is always achieved. It is a set of HTTP-based open-source API protocols that sit on top of the Lightning Network and perform payment request orchestration. LNURL’s aim is to improve end-user experiences by standardizing how the sending and receiving of Bitcoin Lightning Network invoices happens behind the scenes between two participants - usually a User (wallet) and a Service Provider (e.g. website, store, provider, exchange).
While it may seem that the first QR codes shown are identical to this LNURL QR code above, they are actually quite different. The latter can receive multiple Lightning payments of various amounts, from any wallet, and without expiry time.
By leveraging LNURL technologies, instead of having to ask Bob for a new payment request each time, Alice can now simply scan Bob’s provider’s LNURL QR code to programmatically pay him at any time, for any amount, in an on-demand fashion.
While this is already a major step up when it comes to improving user experiences when making on-demand payments, we are still dealing with QR codes. QR codes are universal, can be scanned by any smartphone or camera, and are easy to understand. Their ease of use, comprehensive range of flexibility, and large data storage capacity is what have made them so popular on a global scale.
But QR codes are not the future of payments, certainly not the future of web-first programmable payments. QR codes are interactive, and usually require two devices/mediums - one for scanning and one being scanned. As product builders, we should strive to provide better user experiences for both in-real-life (IRL) and online environments. For IRL flows (usually 1 payer to 1 payee), we simply need to take a look at how NFC technologies for smartwatches, cards, and tags have begun to take center stage in most modern payment experiences (e.g. touch credit cards, Apple watches, recent LN NFC developments, etc). On the other hand, for online-first payment flows (N payers for M payees) we still lacked a replacement for the good old pay me QR code.
Bridging the user divide
At its core, an email address is nothing more than an internet identifier stating that a user inside of a provider can be reached through the following address firstname.lastname@example.org. For example, a Gmail user called Satoshi is emailed through email@example.com (the same can be said of @yahoo.com, @hotmail.co.uk, @microsoft.net, or any other DNS-based domain). You can think of Gmail in this instance as Satoshi’s Email Service Provider.
Similarly, if Bob is a user of the ZBD platform, one would be able to reach him at firstname.lastname@example.org. Except that ZBD is not an Email Service Provider, but a Bitcoin Lightning Service Provider. Instead of sending emails to this address, one would send Bitcoin Lightning payments.
This is what is known as a Lightning Address, a massively simpler way for anyone to send and receive Bitcoin instantly over the Lightning Network.
First announced late last year, the Lightning Address specification has now been adopted by most of the wallets and service providers in the industry. It is hard to come across modern Bitcoin Lightning wallets that don’t support sending and/or receiving payments to Lightning Addresses.
The open-source protocol builds upon the LNURL specification and maps a payment QR code with an internet identifier (an email address-looking string). Ours are email@example.com and firstname.lastname@example.org. Go ahead, pick your favorite Bitcoin Lightning wallet and try to make a payment to any of our Lightning Addresses → We dare you!
Back in the Alice and Bob example: instead of having to ask Bob for a payment request every time, or having to visit Bob’s webpage to scan his provider’s static QR code, Alice can now use any modern Bitcoin Lightning wallet and simply send a payment to email@example.com - no interactivity necessary between Alice and Bob.
Yes, you read that right!
You can now send Bitcoin payments worldwide just like you send emails.
We are talking about truly global & instantly-settled asynchronous payments for users across interoperable Bitcoin Lightning service providers.
The same way you can send emails across providers, from Gmail to Outlook to Yahoo to Zoho, in an on-demand fashion, arriving instantly in the person’s inbox, thanks to the Lightning Address protocol you can now do the same with native internet money.
It’s so easy, even your grandmother could do it.
Given the fact that Bitcoin and Lightning Network are permissionless decentralized protocols, and the Lightning Address specification is fully open source (MIT licensed), anyone in the entire world can participate in this network regardless of geographical location, implementation details, or the actual amount of Bitcoin being sent or received.
Bitcoin means that a sovereign individual who self-hosts their entire money technology stack at home is completely interoperable with Fortune 500 companies’ Bitcoin and Lightning infrastructure, from day 0.
Provider-interoperable user accounts
The ZEBEDEE team recently released a brand new feature called Linked Accounts to users of the ZEBEDEE App. This feature enables UI and UX flows that showcase a new frontier of final settlement capabilities across geographical borders enabled by the use of native internet money — Bitcoin.
By leveraging the Lightning Network, Bitcoin’s layer-2 payments network, and the Lightning Address open-source protocol, we’re able to provide users with human-readable internet identifiers that allow anyone to receive global payments in an asynchronous & on-demand manner.
One of ZEBEDEE’s goals when building digital products is to craft user experiences that are so intuitive they can become second nature for users. Bitcoin and Lightning present a lot of technical complexities, and our aim is to simplify and abstract away the hard-to-understand parts from the user’s experience with the technology.
When withdrawing game winnings from the ZEBEDEE App, verified users will see a new Linked Accounts menu option, displayed above. Bipa, a Brazilian-based Bitcoin and Lightning Network exchange, is our first official Linked Accounts integration partner. Given that both ZBD and Bipa had Lightning Address interfaces for their users, the entire technical integration from kick-off to the first production build took just under 3 weeks!
All it takes is for the ZBD user to select the Bipa provider in the app and enter their Bipa Lightning Address. Users can then transfer Bitcoin from ZBD (US) to Bipa (Brazil) over the Lightning Network, reaching settlement finality in milliseconds and incurring virtually no fees.
That’s it! 3 simple taps and money has reached final settlement on a global transfer between two different providers. Bonus points if you use the auto-convert capability which turns your Bitcoin into Brazilian reais at the time the transaction settles.
Editorial (Santos Hernandez)
Back when I worked at American Express (Amex), I was part of the Global Data Repository team and as a Product Owner, I was involved in many bank-to-bank integration projects. These interbank projects would always span multiple years, going through months of commercial negotiations, followed by intensive product strategy and planning, to then finally arrive at actual software development and testing. Then, and only then, could these integrations receive their final production-ready implementations and go live to bank customers. I was personally involved on the team that integrated a Brazilian-based bank with American Express’s cards network, as well as the very first Chinese-American payment network to be integrated into the Amex system.
The reason these integrations always took so long during the development phase was that each and every bank did things their own way. There were very few interoperability standards that a new bank or fintech could follow to be easily connectable to all (if not most) of the participants. Every integration required its own technical solution, meaning that integrating the 1st bank, did not make integrating a 2nd, 3rd, or 4th fintechs any faster or easier.
All of these issues disappear under a Bitcoin financial system where all participants choose to adhere to one set of monetary network standards. And with the Lightning Address protocol, fintech providers can pass this powerful capability down to their users and serve them human-readable identifiers, reaching true interoperability between Bitcoin Lightning service providers.
Integrating Lightning Address means integrate once, connect everywhere.
The value grows as the network effects play out. Providers can now become fully interoperable with one another in a matter of weeks instead of months or years. By consuming the same open-source money standard of Bitcoin, the open-source payments network of Lightning Network, and the open-source user identifier protocol of Lightning Address, users can now send money instantaneously across the globe, to any number of users of any provider. No chargebacks, no delays, no outages. Just pure seamless UX for users to send global payments in real-time.
And we haven’t even touched on the fees! Due to traditional banking fees, microtransactions at scale aren’t feasible for any amount below $10 or in the case of wire transfers, approximately $75 due to a $35 wire transfer fee. You would also need to wait for the settlement, which could take days and carries a ton of risk for banks due to fraud.
The implications of these recent Bitcoin and Lightning Network developments are massive from a global and final settlement perspective, and we should all be paying close attention.
About Santos Hernandez:
Santos’ background is in building products and product teams at fintech companies, most recently being a Product Owner at American Express where he was on the team responsible for all things corporate data, payments, risk & compliance, data quality, marketing & sales, and banking partnership integrations. Currently he is the Business Lead of Product and Engineering at ZEBEDEE, where he is responsible for product design, development, and general strategy.
P.S. →Linked Accounts functionality is currently only available to Brazilian users through ZEBEDEE’s recent integration with Bipa. Stay tuned as more integrations are currently underway to support users of the various other countries and regions ZBD supports.
If you are a Bitcoin service provider that would like to learn more about Lightning Addresses you can check out some of the resources below:
Lightning Address → lightningaddress.com
Lightning Address for Service Providers → https://zebedeeio.notion.site/Lightning-Address-for-Service-Providers-0deeadc930b94697af919b21e71fe8b1
LNURL Documentation → https://github.com/fiatjaf/lnurl-rfc
Lightning Decoder→ lightningdecoder.com