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Koji Higashi | Connect the World

Lightning in Japan

This week, in Episode 24, we talk to Koji Higashi, the founder of the Japanese Lightning Network community Diamond Hands.

Koji helped build Nayuta Core, a fully non-custodial neutrino mobile wallet. He did this together with his best friend in the space, Christian Moss who is the co-founder and head of gaming R&D at ZeBeDee.

They also worked together in the creation of the Bitcoin game Lightning Crush. Players receive real time sats as a reward when making a combo in the game!

If you also love to build new things and always want to try new experiments, then watch or listen to the full interview or start reading below! But watch out, because Koji’s incredible entrepreneurial qualities are highly contagious! Enjoy!

Do you also want to know why Peter thinks every Bitcoiner should mine?

Watch or listen to the full interview or start reading below! Enjoy!

Lightning games

Lightning Crush is a Lightning game you made in May 2021. How did you come up with this idea?

I helped design and build Nayuta Core, but there is only SaruTobi who enables non-custodial streaming feature. I was trying to ask other apps to adopt it but I felt it’s probably faster if I do it myself. There is some decent Unity assets I can purchase and I basically hack them together with help from Christian as well.(Chris and I have been working on different projects together since 2015 and he’s one of my best buddies in the space)

I thought the cool feature is real-time sats rewards when the player makes a combo in the game, we tip her 1 sats real-time. The real timeness is really important imo.

You believe that you don’t need millions of dollars to get a lot of users and that sometimes 1 sats can go a long way. Can you explain the role of Lightning Crush and Diamond Hands in this context?

This is a very interesting concept for me as of late and something that is still not explored enough regarding Lightning.

Lightning’s microrewards are usually between 1 sat to 10k sats for example. Compared to other crypto use cases, like DeFi, NFT etc, the amount of money you can earn is very small. This is the main reason why lot of casual new users assume those crypto or web3 projects are “better”. At the end of the day, everybody wants to make money as easily as possible.

But there is always a tradeoff. The users of those projects who giveaway tokens/NFTs etc  are there for money and that’s all. “Tokens” are essentially the product for them and there is no incentive for companies to build a better product with sustainable utility or users to stick with one project.

Money changes the relationship with builders and users and having too big of monetary incentives in my opinion destroy long term utility and sustainability of the project in exchange for a short term gain.

Microrewards with Lightning are different. although we can’t ’give’ users, thousands of dollars in random users to change their life,

’t’won’’ dis’upt the va’ue pr’position of ’he a’p an’’r’ther it can potentially strengthen their relationship with users.

What kind of  “lightning game” would you like to develop in the future if you had unlimited funds?

The problem is more about my personal time but if I have unlimited time, I’d build a game that utilizes Lightning and NFTs. In fact, I had some ideas like this and have discussed them with Chris before but due to time constraints, I kind of gave up on it. I can make an even more interesting game concept than Lightning Crush if there is unlimited time and money obviously lol

Will Zebedee wallet be the leading wallet / implementation for all games in the future?

I think ZBD is def the market leader in Lightning gaming and I support them personally, too. With that said, the Lighting market is still wide open and I cannot really predict accurately what will happen exactly.

You like to start things up and then leave it to other people. For example Lightning Crush, Nayuta Core, Diamond hands, Bitcoin Lab… What will be your next project?

This is actually a very good question!

My main focus is Diamond Hands now and likely this will be my main commitment for a long time.

It’s true that I always want to build new things and try new experiments rather than doing the same thing for a long time. The main reason I build those things and pass them to others eventually is that I feel I cannot really scale those products to 100k or even more users myself. It requires different skillsets than just building it from scratch and I am aware of strengths and weaknesses. And I don’t really like managing people or a company or worried about compliance for example.

With that said, Diamond Hands is neither a company or even a product. It’s a community of many users and also the culture to nurture innovations with Lightning rather than building one single product or a company. This fits very well with my own experience and personality and I am committed to growing the community and building many interesting with it in the future as well. Also, routing is very interesting and is an area I can utilize my knowledge and creativity as well, so I am pretty committed to it even though it’s not profitable yet.

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Nayuta core

Nayuta Core is a non-custodial Bitcoin and Lightning Network wallet. You helped with the startup. What makes this wallet so special?

It originally started off as a mobile full node wallet that Nayuta was building with the help of Christian Moss. Then a bit later I decided to be more involved with the project and try to make the concept more accessible. Long story short, it didn’t really work and we couldn’t really find strong demand or a feasible business model, so we pivoted. 

The current Nayuta Core is a fully non-custodial neutrino mobile wallet. The characteristics are you can manage your key and channels yourself and also offers a non-custodial streaming payment feature that works on SaruTobi and Lightning Crush. The UI design is also kind of special and different from most other wallets.

Although most wallets are going away from completely non-custodial and self-managed wallets, but I still think this type of wallet will find its place and demand in the future.

Do you believe everybody should run their own node? Do you see Nayuta Core also as an inspiration for other companies to focus on the combination of a non-custodial solution and user-friendliness?

I think they should theoretically, but at the same time, this likely won’t happen. But something like Umbrel is a great initiative and more people should run a fullnode for sure.

Lightning

What was your first experience with the lightning network and do you still know what you did/saw at that moment?

My first experience with Lightning was playing with Acinq’s eclair testnet wallet. At the time, I was not very familiar with the concept of a Lightning channel, routing etc and using it myself really gave me a better picture of hot it worked.  The first time I managed to send and receive payments on Lightning gave me a similar feeling as when I made the first Bitcoin onchain transaction and check the record on an explorer. I was still not sure how it worked exactly but felt something new and cool was happening there.

Also, I was the first person except for the developer himself to buy a coffee with Lightning in the real world situation. (That’s a huge accomplishment!)

What security concerns of the lightning network do you think are undervalued nowadays?

Hot wallet security for routing nodes. For exchanges and large companies with a lot of funding, this can be a acceptable risk for them, but without improving this aspect, the risk for individual operators is still relatively high and routing economics won’t be decentralized.

What do you think is the most promising implementation on Layer 2 on Bitcoin? (Acinq, Lnd , c-lightning or anotha one.)

I don’t really have a strong opinion on this, but we use LND and we like their integration and appls on Umbrel. On the other hand, Core Lightning is much more efficient in dealing with routing history and both have pros and cons. Lightning is not the same as onchain and different implementations compete against each other and offer different functionalities is health.

Do you use node management services like lnnodeinsight, lnrouter or something else to get the best out of your node?

We use Amboss very often obviously but have not been able to utilize lnrouter etc much to be honest. I am definitely interested in using them to help with routing though. It’s just not enough time to try out different things and adjust the node policy manually etc.

In November last year you had some issues with cheating. What security problems did you have?

The main issue was some players basically crack the app’s code and manipulate scoring and/or beat every level in a few seconds etc. This is also very common in gaming in general bu was very annoying. The concept to put Candy Crush and Lightning micropayment’s is not that difficult but preventing cheating is in a way more challenging and something Lightning game companies are all trying to figure out.

What kind of security measures do you take against attacks?

We banned certain IPs if there are suspicious activities(unreasonably short playing time etc) , but this is a whack-a-mole and attacks never end. 

So we ended up limiting the wallets that can link to the game to ZEBEDEE and Nayuta Core. Most attacks were from custodial and non-KYC wallet such as Wallet of Satoshi. ZEBEDEE requires some identification and is game focused obviously, and for Nayuta Core, opening a channel requires some manual work and is not easily manipulated.

This may not be a often discussed point, but if you decide to integrate Lightning to your game or your app, cheat prevention is a huge area of study and there is probably not enough tool set available for this. That’s something I learned from building and maintaining Lightning Crush. (Good experience nonetheless)

How can we influence / motivate users for more adoption? What could be a key element ?

The most basic biggest thing is that more applications adopt Lightning and it becomes useful for regular users. I am a Bitcoin supporter and want more people to adopt Bitcoin and Lightning for ideological reasons as well, but I am a bigger believer in doing things that make economics sense. Convincing merchants to adopt Lightning payment or companies to integrate Lightning somehow won’t happen unless it makes business sense to them. The same goes for user adoption. So, I think it’s a simple matter of building more products and tools that are useful for people. We’ll eventually get there, but I want to help with this cause more personally as well.

What do you notice about the Bitcoin and Lightning adoption in the neighborhood where you live, Taiwan & Japan? Any merchants nearby?

Lightning merchant adoption is close to zero both in Taiwan and Japan. Some merchants in Japan in the past have adopted Bitcoin(onchain) payment but the use is minimal and most have given up on it by now. The reason is a tax system in Japan as well as a  lack of demand and understanding both by merchants and users.

There is actually an experiment Diamond Hands started doing using a lottery system recently. We are hoping something like this will indirectly help with merchant adoption in Japan and possibly in Taiwan and get more people started with Lightning.

You once wrote that the news of El Salvador and Twitter announcing Lightning integration made a lot of Japanese companies pay more attention to Lightning. Can you point out which developments you noticed exactly?

Even the mainstream media covered El Salvador and the Twitter Lightning integration news. Also after those news, it became easier for me to talk to companies and convince them of the usefulness and practicality of Lightning in general. Recent development with major retail stores in the US accepting LN will be a big signal for Japanese companies as well.

What is the reason that Lightning adoption in Asia is very low when you compare it to the rest of the world?

This is a very important question. In general, there is more concentration of Bitcoin developers in the US and Europe. They are the first people to adopt new technology and that’s the main reason why Lightning adoption is lagging behind in Asia. Mostly a lack of skilled/protocol developers in general.

The other huge factor is local communities. Countries where real Bitcoin OGs(2009-2014) are still active have usually better Lightning adoption even in Asia. Japan’s Lightning community is still relatively small but Bitcoin OGs are still more or less involved including exchange founders and they are helping maintain a strong community for adoption.

On the other hand, countries where “OGs” are considered those who started in 2017 during the Ethereum’s ICO bubble era, they tend to not understand Bitcoin and disregard it as some old tech. In my estimation, lots of Asian countries like South Korea, Taiwan are in this category and thus Bitcoin adoption is low.

You once wrote that the news of El Salvador and Twitter announcing Lightning integration made a lot of Japanese companies pay more attention to Lightning. Can you point out which developments you noticed exactly?

Even the mainstream media covered El Salvador and the Twitter Lightning integration news. Also after that news, it became easier for me to talk to companies and convince them of the usefulness and practicality of Lightning in general. Recent development with major retail stores in the US accepting LN will be a big signal for Japanese companies as well.

How do you see the role of social Lightning communities like Diamond Hands, Connect the World and many others for the adoption of Bitcoin in Lightning?

I think it’s huge and they are still under-appreciated sometimes.

Those communities are the backbone of all the activities related to Lightning. Without them, building a successful product or a company with Lightning becomes 10 times harder in my opinion. Building and maintaining an active, well-educated community is as hard and as important as a very successful company in my opinion.

El Salvador is a huge model case for this but other countries like in the US, Germany and the Netherlands also have similar stories because of those local communities. And the Diamond Hands community is doing the same in Japan.

One of my personal goals now is not only grow the community in Japan but work with communities elsewhere more actively and help establish local communities like Plebnet, Ring of Fire, Diamond Hands etc as well. In fact, I have started working on exactly that recently in Taiwan and maybe I can talk about it later.

In our last episode we spoke to Fiatjaf and he is a big supporter of more development of apps using Lightning and showing new use cases. What kind of use cases and apps could developers explore more to further help the adoption?

This is a million-dollar question to be honest lol

But my personal view is that I want to build tools or applications to help integrate Lightning into regular applications for reward distributions. There are still tools missing but microrewards will be a versatile concept that can onboard thousands of more companies and apps potentially.

Do you think it’s more important to raise attention for the use cases of Lightning instead of only building tools that let you earn sats or are focused on gains in some sort?

I think they are both important. Microrewards can be a concept to help with more adoption, but there will be many other important use cases of Lightning in the future, so we should def try to raise attention for those as well. It’s just that it’s easier to show something that works now rather than future concepts sometimes, especially for more casual users.

Fold, Casa, and Umbrel are some examples. Across the breadth of these tools (and a lot more of course!), you see 1 similarity that they all have in common. Their working on making tools more user-friendly and focusing on user experience and security. Why do you think this is so important? And will this make the difference for adoption in the near future?

This is super important. One of the issues I see with the Bitcoin community sometimes is its lack of focus on UX and other crypto communities def did the better job in this aspect.

But I think the attention level for UX has risen with Lightning projects and I think we are in the right track now. Still lots to improve though.

lightning, the solution for the scaling problem of bitcoin, or do you think it’s just a stopover?

It’s one of them but not the only solution most likely.

Extra

What kind of other layers 3 solution would you like to see in the future?

Depends on what the term layer 3 means but I’d like to see a layer or a whole suite of tools where it makes it much easier to integrate Lightning into existing applications and infrastructure. This is still missing. (related to the topic of cheating in gaming)

Bitcoin Lab is the first and one of the largest Bitcoin and crypto study groups in Japan.

Can you compare it with something we know in the western world (chaincode labs)? How does it work?

No, not really at all. It is not really a diehard R&D group such as chaincode labs. It’s more of a study group we were doing back in the days. Now another company called AndGo took over and I am off from creating content etc as well.

What kind of services do you use nowadays: credit/debitcards, satsbacks, Fold,….

I like Fold, but it is not available in Japan and Taiwan. Too bad. One of my favorite services I use often recently must be Umbrel. Their idea for personal server is not easy to achieve but they’ve been doing a great job so far imo.

Why is it that the Ethereum development community is bigger in Taiwan than Bitcoin development. Do you see changes in this last year?

This applies to any other country but where the earliest adopters are not Bitcoiners, Ethereum tends to be more popular and/or they assume Bitcoin is some old tech that is not useful for anything. The reason is that when people join the space in 2016/2017 for the first time when ICOs on Ethereum were all the rage, they’d believe building some apps, issuing tokens and making money is all that matters. They skip the more fundamental questions with decentralization, incentive design, what is money? That kind of stuff and there is nobody to ask in the real community as well. Etheream people who joined in 2017 are considered OGs in those countries.

 

Taiwan is one of those countries, so is Korea mostly for example. I don’t necessarily criticize them though. They do whatever they think is right.

 

I don’t think this will change anytime soon in Taiwan as there are better job opportunities in NFT, DeFi etc here. With that said, Diamond Hands started collaborating with Taiwan Bitdevs community and I am very hopeful they will build a solid Bitcoin and Lightning community here and we can also help.

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