Jimmy Song, an influencer known in the Bitcoin environment for his battles against Roger Ver and his maximalist approach to the cryptocurrency world, is openly in favour of Strike, an app developed by Jack Mallers, a Lightning Network developer.
Song has published an article in which he explains the reasons for so much enthusiasm, but before getting into the matter here’s a small summary of a few points.
The typical use of Lightning Network (LN) involves opening a payment channel by executing a financing transaction to the network on the relevant blockchain (in this case Bitcoin), followed by any number of Lightning transactions between participants that update the provisional distribution of funds of internal channels without transmitting them to the blockchain.
Subsequently, it is possible to close the payment channel by transmitting the final version of the balance sheet, net of expenses and receipts, so that it can be written on the blockchain.
Zap – that’s what Jack Mallers calls himself – has been in the space for a long time. Grown up in a family of bitcoiners, he worked hard and confronted the problems related to the complexity of using LN. A few days ago he declared:
“Today, we are announcing Strike, an application that allows you to make Lightning payments with your bank account or debit card”.
After following the technology for two years, this young developer proposes a solution capable of accelerating the adoption of Lightning and the use of micropayments on Bitcoin.
Strike allows people to buy In-BTC by credit card and spend them within the services and activities that accept payments through Lightning Network.
We have used the suffix “ln” before BTC to emphasize that buying via credit card does not guarantee the possession of BTC, in fact by examining the characteristics of the service, it turns out that it is completely centralized and Zap is the custodian of the cryptocurrency.
The compromise is necessary and the developer is aware of the need to take action to simplify the adoption.
For consistency we should call bf-BTC the Bitcoins purchased and left on Bitfinex, or bi-BTC those exchanged and stored on Binance.
Even the exchanges, except for DEXs, are centralized entities. Unless our BTC are deposited on addresses to which we have the private keys, our balance sheet is just a number on a centralized ledger that very few have control over. As a result, we can’t claim to hold cryptocurrencies until we withdraw them.
This classification would help us to better understand the phenomenon but for the moment it is just an exercise in style.
According to Jimmy Song, Bitcoin is first of all a store of value, his narrative has always been against everything that allows quickly spending “Bitcoins”.
This school of thought wants the controlled inflation and resiliency of the network to be enough to make BTC digital gold.
The function of a medium of exchange and therefore of “cash” has never been described as fundamental by Jimmy Song. But now that LN becomes a payment system and attracts capital thanks to its spending potential, electronic cash becomes important again as a concept for adoption and therefore as a store of value.
The monetary function of Bitcoin, before that of digital gold, is very important also to Daniel Krawisz – undoubtedly with a different belief than Song’s – who in one of his Tweets today reaffirms the concept:
Money can't be a store of value if you can't make payments with it. Its value is what it can buy in the future. Thus it has no value if it can't be used for buying.
— Daniel Krawisz ⚡️ 🔑 (@DanielKrawisz) February 5, 2020
What differentiates the two approaches is the emergence of the model on which Strike and other similar services are basing their business.
Centralization of coin and alternative forms of money transmission.
Sidechains or avant-garde networks, subtract useful payment transactions from the miners’ management, jeopardizing the PoW incentive system at its foundations.
Every payment service that holds the coins resembles PayPal, a success of these proposals could bring undesirable effects to the logic governing the Proof of Work.
Daniel Krawisz is the same person who in 2014 introduced for the first time the concept of Hyperbitcoinization in an article for the Satoshi Nakamoto Institute. A conceptual model that saw in Bitcoin’s Proof of Work the tool for a planetary scaling. That’s why now he embraces the idea of big blocks, first with Bitcoin Cash and then with Bitcoin SV, offering a breaking point of view compared to the one promoted by BTC.
The function of the Miners and the incentives for which they protect the network is the subject of commotion. Only time will tell which vision will have been more forward-looking.