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Bitcoin is the best collateral there is!
Co-founder of LN Markets Romain Rouphaël featured on Connect The World. LN Markets is a trading platform built on the Bitcoin Lightning Network which uses Bitcoin, paid and settled over the Network as collateral for derivatives trading.
Romain has a history in legacy financial markets but when he did his first bitcoin transaction (sending back money to France) in Hong Kong somewhere around 2012 he immediately saw that this was the future he wanted to build on. Both his brothers still work at traditional financial institutions which leads to nice discussions during family dinners. Check out the aftertalk Stef & Edward had below!
Possibilities to connect to web applications and other tools without the need of email or registration is very important and make the UX feel more seamless. Do you think it will remain possible to make Bitcoin and Lightning applications more user friendly despite future regulations?
It’s a tough question. Our focus with LN Markets has been to leverage the Lightning Network for instant trading. With Lightning, we can build new interactions with the market: instant account creation and instant transfers for instant trading! When you think about it, the ability to move money all around the world, instantly, at low-cost is just mind blowing and is bound to have implications in the world of finance.
Now will financial regulation adapt to this new paradigm or try to fight it? I think fight it in a first time, and if the technology is good enough, it will prevail.
The LN Markets node forwards two times more Bitcoin on the Lightning Network every year. Do you think we can use this exponential metric to measure the adoption of Lightning?
Yes, most node operators do not share this kind of metric but I think they’re pretty consistent with the rest of the network. We have almost not changed the settings of our node since 2020, so it can be used as a good proxy in my opinion.
Connecting to LN Markets can be done by using LNURL or any other wallets supporting LNURL-auth. This solution seems the most efficient and secure way.
Will logging in with a Lightning Wallet become a more common and mainstream solution in the future?
We clearly think it has a potential to become a new standard. When we launched LN Markets and people could try lnurl-auth in the wild for the first time, they were mind-blown. I remember Marty Bent coverning it in his newsletter when we just started. When people think about Web3 they often refer to the idea that people can self-manage their idendity with cryptography, and that’s exactly what we’re doing.
I would prefer to use some kind of lnurl-auth login for all my online interactions.
Some developers think the Lightning Network will eventually become an infrastructure, which will create conditions for a multitude of use cases to arise. What is your thought on Lightning as an infrastructure?
You mean like having a decentralized web, browsers or social apps on top of Lightning? That’s some very interesting use cases and it’s good to see people building that. But in my view, as with Bitcoin the first real use cases to emerge will be money and finance related.
If the Lighting Network will eventually scale to a new infrastructural standard, do you think centralisation is inevitable?
I don’t think so. Bitcoin is widespread as a money infrastructure and is still decentralized. Lightning can become a new standard for instant transfers and still manage to retain decentralization in my opinion.
Seeing Lightning as a working capital asset and earning yield could also be very important for increasing adoption.Developments like Taro and RGB could be the next big breakthrough for the Lightning Network.
Do you think this will be indeed important to have more adoption in the near future?
Yes, definitely. RGB and Taro are very important projects. No matter what one thinks about the relevance of stablecoins or tokens, the fact is that they’re used and popular. It’s important to give builders the possibility to develop new products for their users.
It’s still the early days for RGB and Taro, so it’s still hard to assess what these protocols will look like or how they will be used, but we definitely monitor these closely and look forward to build on it.
Is centralization always a bad thing in your opinion?
No, I definitely don’t think so. Centralization is the most efficient way to manage a lot of processes, that don’t require decentralization. Decentralization is of paramount importance to fight censorship and we should do more for Bitcoin privacy. But centralization is not intrinsically bad.
In August Alby set an example of LN Markets in a tweet to find web app developers to help implement Lightning in their own dev project.
Do you also think it is possible for a lot of web applications to implement Lightning payments and/or passwordless login?
Yes, all applications could easily implement it. Today, Lightning usage is quite niche. Most web apps do not feel that they need to absolutely address the Bitcoin or Lightning segment. It’s more a business than a tech question.
How many people work at LN Markets? And how do you find skilled developers?
We are 9 in the LN Markets team. We have been lucky to never look for team mates really long.. All of our hires come from our own community! Which is really great. Come and Victor are LN Markets co-founders with me. Come is our CEO, Victor is our CTO and I’m COO. We have 5 developers: Fanis, Lounes, Yoannn and Kilian in France, and Kim in Berlin. And of course of community manager Koty, one of our kindest users before joining us.
Could the gambling industry or sports betting,… be a big future players for the LN?
Yes, it could really be fun to explore. Though we have already plenty to do with financial use cases for the moment.
We’re going to sponsor a world cup betting tournament organized by Einundzwanzig, a German speaking group of Bitcoiners, with 6 million sats of gains. The proceeds will go the great Bitcoin Ekasi initiative in South Africa, it’s gonna be fun!
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With ITŌ, you develop innovative products and services designed for financial markets professionals. LN Markets is one of those services you developed. LN Markets is a new type of Bitcoin derivatives trading platform that can only be accessed via the Lightning Network.
How does the platform and the Lightning integrations work?
The platform is really easy to use, all you need is a Bitcoin Lightning wallet. In order to create an account, you can just scan a QR code. And to make your first trade you just need to make a Lightning transaction to instantly open a position.
We offer two main types of derivative products: futures and options on BTCUSD, the price of Bitcoin expressed in Dollar. All transactions occur in Bitcoin. There is no fiat money involved.
In order to open a position, you need to deposit what we call a margin, paid in sats. And after you close your position, you can get the margin + PL instantly back to your wallet.
What are the key benefits of using the Lightning Network within this trading platform?
The main benefit is speed. Also, since you can trade directly from your wallet, you can reduce the risk you take. Instead of having to deposit funds in advance of your trade, you can just move funds to open positions on the go.
What other possibilities are there to connect to LN Markets, aside from LNURL?
You can also connect your node with Lightning Node Connect, a protocol developed by Lightning Labs which allows to simply synchronize your node to LN Markets. And with credentials, when you just enter a username and password.
What are the possibilities to build a trading bot on the LN Markets platform?
I have developed a few bots in Python myself, available on LN Markets repo.
How many traders are using the platform on a regular basis? And what is the average trading volume per day?
We have thousands of unique users per week, and the average daily trading volume ranges between $500k to $7M. We just recently lifted the trading limits on LN Markets from 1 million sats per account to 10 million.
With LN Markets you believe that the Lightning Network will be used as a settlement rail by all leading financial institutions. Can you elaborate on this vision for the future of the LN to what developments are key in this path from LN Market’s standpoint?
So far LN Markets is mostly for retail users. But since with Lightning, we have the possibility to move funds instantly, we think there is going to be a huge B2B market as well. Indeed, with Lightning hedge funds and trading desks could move money in real time to pay their margins for example, this could have avoided a lot a liquidations.
In addition, the Lightning Network could enable the rise of peer-to-peer clearing between financial institutions, without the need for a central clearing house.
In Episode 33 we spoke to Kevin Cai from Kollider, which is a real-time settled derivative exchange. And their trading engine uses the Lightning Network. What are the biggest differences with LN Markets?
When we launched LN Markets, it was the first trading platform build on Lightning, and has been for a while. So we have pioneered many features that have also been later by subsequent platforms.
Kollider has an order book model. While LN Markets quotes a bid offer and is direct counterparty to all trades. We chose this model because our focus is on speed and we did not want any liquidity issue with this new trading paradigm, and we think it’s been the right move.
LN Markets offers a leaderboard to compare your trading performance to the best traders. What are other features you are developing to enhance this community and learning aspect of the LN Markets platform?
We are developing new social trading features. Some of our users often ask trading advice of how they could improve their trading performance. So we have had this social trading idea that we are developing.
Basically, you will be able to follow other traders on ln markets, and invest some sats in following their trades. Followers would gradually benefit from more experience traders expertise.
While the best traders, for example the ones on top of our leaderboard, could create their profile, demonstrate their perf, explain their style, and have other users invest in them in exchange for a fee.
We would make it simple as first with more advanced products like investing on a basket of users later
We talked earlier with Ben Arc and with Fiatjaf about nostr, a future free and decentralized social media network. Are you also thinking of integrating nostr within your platform?
For example for the Trollbox? And can you also explain to the listeners what the Trollbox is? 😉
Yes, would be great for our trollbox! Our developers are already very motivated to do it!
The Trollbox is the LN Markets chat-room that lives on the main page. It is a gathering place for people with a passion for Bitcoin, Lightning and LN Markets.
No so long ago you also added Lighting Address support. Are there other future developments you are working on with LN Markets?
Lightning Address is cool. It’s an example of protocol that can make Lightning more simple to use and help the network get more traction. Lightning addresses are also used a lot for internal transfers between users.
We have also added the quite controversial sat symbol!
Some think it just looks like kebab meat too much but we like it..
We have also this cool thing we’re working on: automatically paying PL straight to your Lightning Adress after a position is closed with take-profit or stop-loss. This is a really cool feature for anyone who thinks not your keys, not your sats!
The LN Markets node is more than 2,5 years old and has over 300 channels. What is the main function of this Lightning Node?
The main function is to manage LN Markets deposits and withdrawals. We also use it to monitor the network and its growth. At first we had a very loose policy for channel openings and fees, but we had to be more restrictive over time to let it scale. We charge 0 routing fees to help fluidify the network!
Also, a little known feature is that we charge zero fee on loop in! Indeed, users can deposit funds on chain and withdraw on Lightning for free!
Jonathan Serra made a Telegram bot plugged to the LN Markets API. Do you have a Telegram bot feature working on Mainnet? And if not: are you planning to make one yourself?
Yes, that’s on my to do list! Would you use it?!
We also have a bot on Discord which is easy to use, with the possibility to create tournaments between users.
What kind of products/services would you like so see on LNmarkets, when RGB, Taro or something else are fully running? Gold, pensions, oil,…
We could potentially do anything. What we’ll take into account to choose is a mix of user demande, market size, possibility to hedge and regulatory context.
With Lnmarkets you want to show to the traditional financial system that an alternative system is born…
When will we see big liquidity entering the LN market ?
Gradually, then suddenly! We feel more confident with the network and are gradually lifting our limits. The network is getting more robust each day that passes and I’m confident this will happen in the coming years.
If you look back to the last 2 years of lightning development and have to look 2 years in the future, where do you think we are with lightning by then?
The network will have x10 all its metrics, will still be mostly run by the plebs with more and more traditional actors joining the party.
What’s the biggest problem you encountered or hurdle that you had to overcome with Lnmarkets ?
We have had a lot, that we have detailed in our talk for Adopting Bitcoin last year: https://bitcointv.com/w/wUiLvZJVqzsj2ksiUnsxqL
What kind of app would you like to see on your mobile in the next 4 years?
More decentralized social networks
We have LND (lightning labs), c-lightning (Blockstream), eclair (Acinq), and some more… These are all implementations on the second layer. Do you run/test them all?
No, we would like to do that, but we are a small team so we prefer to focus on the implementation we run for the moment, which is LND.
We talked with many guests about how important speed and deliverability are for adopting the Lightning Network. For example, nobody wants to wait 8 seconds for a payment to be processed. What do you think can help to make the Lightning Network much faster in the near future?
Ahhh I’m not a dev, but I’d like that as well!
What is the latest thing you are working on, right now?
The new social trading feature on LN Markets.
What do you see as the most important feature for the Lightning Network that is currently missing?
Channel factories would be really cool.
What is the most noteworthy insight you learned about the Lightning Network during the past years ?
Tech is hard 😉
Can you pay with lightning where you live? Are there merchants that accept BTC or lightning?
I just live near a Bitcoin co-working place where they accept Bitcoin and Lightning payments! Apart from that, not too much I’m afraid.
What features does lightning need to reach the next level of maturity?
The tech must become invisible. It’s too complex to use right now.