First Principles of Internet Money: Part 2

August 09, 2024

In the previous article, we discussed why traditional payments and money have not yet been disrupted by the internet and the web. Instead, entirely new systems had to be created based on first principles. We like to think of Bitcoin and the Lightning Network as a reimagining of money and payments from the ground up. 

Definitions Bitcoin: a decentralized monetary network and cryptocurrency that runs on the internet.

Lightning Network: a layer 2 protocol that runs on Bitcoin for scalability and instant, low-cost transactions

In this article, we'll dive into what makes Bitcoin and Lightning Network akin to the Internet by their shared foundational principles.

What made the internet special was the sharing of underlying technology with telecommunications networks. However, the Internet does something different with this infrastructure:

On the Internet messages are broken down into digital "packets" of data which means that the wires can be used much more efficiently, to carry a much higher volume of information, at a lower cost.  

The internet’s innovation in sending data across telecommunication networks led to an unmatched Pace of diffusion: 

While it took the telephone close to 75 years to reach 50 million users, it has taken the World Wide Web only four years to reach the same number. 

International Telecommunication Union - The Internet: challenges, opportunities and prospects

Today, there are about 5.35 billion internet users. By the end of the decade, effectively the entire planet will be internet users. Four decades and it took over the world.

With that in mind, wouldn't you like to rewind to 1990 with hindsight about how important the internet would be? Well, you might get that chance. There’s a technology wave as disruptive as the internet coming. It's 1990 for Bitcoin and Lightning, and it's about to bring another technological renaissance: the internet of money and payments. So let's dive into the principles behind Bitcoin and Lightning.

Bitcoin and Lightning Network share the underlying infrastructure and technology of the Internet. However, Bitcoin and Lightning do something majorly different. They are bootstrapped networks in which no one controls the protocol, and yet anyone can participate. Their core application is internet money and internet payments. Got an internet connection? You can send, store, and receive this internet money anywhere, anytime. And we can do it with QR codes. 

Can you see now why Bitcoin is outpacing even the internet's pace of diffusion? In concrete terms, the Lightning Network was released 6 years ago. It is now accessible to over 450 million users across apps and platforms that integrated into the network. Household names like Cash App and Nubank are a part of the network.

Interoperability is the key idea behind Lightning's rapid pace of diffusion. Every app can connect its users to a myriad of other apps connected to the network. Leveraging vast user bases across multiple geographies and currencies, Bitcoin and Lightning are connecting the world through one monetary and payment network. The internet (interconnected network) of money and payments. 

Meanwhile, traditional currencies and payments are starting to look lame. They're certainly one of the more frustrating parts of dealing in an online world. Does that mean they're doomed to disappear in favor of this internet money? Probably not.

In fact, another feature of Bitcoin and Lightning is the ability to support other kinds of assets, not just Bitcoin. Taproot Assets, a multi-asset protocol being built on the Lightning Network, enables traditional currency equivalents, known as stablecoins, to be issued and transacted across the Lightning Network instantly and at low cost. At its core, Bitcoin and Lightning are going to power global interoperable finance on the internet.

We may look back and see how Bitcoin grew from a handful of users in 2009, to being a money and payment network available to everyone on the planet in less than a decade. This is mostly thanks to the first principles approach to Bitcoin and the Lightning Network.

As exciting as this turn of events is, Bitcoin and Lightning are just getting started. In the next article in this series, we'll explore how the Decentralized Web will be powered by Bitcoin and Lightning.

But going back to today and where we're at with business as usual, we need to ask ourselves: are our businesses being built on first-principle thinking, especially when it comes to the future of fintech, payments, and commerce on the internet? 

If the answer is no, consider reaching out to us at Neutronpay to give you a headstart for your go-to market with this technology. With a single API integration, your business can leverage the power of Bitcoin, Lightning, and all its future features.