Lightning coin in piggy bank
Illustration: Protocol

Jack Dorsey’s backing Lightning as a bitcoin payments solution

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Monday: Lightning's out of the bottle, Fidelity’s crypto ETFs, and the end of the Lehane saga.

On the daily

We made it! Welcome to the second week of the new daily Protocol Fintech. Today, Tomio Geron takes you through a crucial issue: lowering the cost of crypto payments. So many problems, from unwelcome environmental impact to a lack of adoption by consumers and merchants, have held crypto back from its promise of disruption. Read on for the latest on a key technological development that could change that.

— Owen Thomas (email | twitter)

Getting Lightning out of the bottle

For crypto to go mainstream, it needs an easy, cheap and fast way to make payments. Why is that still so hard?

It’s especially confounding given how long bitcoin has been around. Buzz around bitcoin for everyday purchases was building by 2013, when you could hunt around and find, say, a Subway restaurant that would exchange 0.04 BTC for a chicken bacon ranch sub. But it didn’t stick. As interest in bitcoin among retailers faded, enthusiasm from speculators grew. Why would you want to part with your bitcoin if you thought it would go up in value? (That Subway sandwich would cost $1,500 today.) Another big reason why bitcoin didn’t supplant Visa and Mastercard: Though the price has come down, the average transaction costs nearly $2, which is prohibitive for a lot of purchases. Settlement times are lengthy, too.

There’s an answer, some advocates say: Lightning. The newer technology built on top of the underlying bitcoin blockchain bypasses some of those obstacles.

  • Lightning processes payments off-chain, later grouping them together and adding them back to the bitcoin blockchain.
  • This approach is faster and cheaper — and it also reduces energy usage, a major criticism of bitcoin.
  • Now the question is whether the upgrade to Lightning can recapture bitcoin’s potential.

The biggest name backing Lightning is Jack Dorsey. The Block CEO is a big believer in bitcoin, to the point that he dismisses other cryptocurrencies. That means he’s got to make bitcoin work.

  • In 2018, Dorsey made an investment in Lightning Labs, an open-source company working on Lightning.
  • Block’s Cash App recently adopted Lightning, promising to roll it out to all of its users over the coming weeks. That allows for fee-free payments to other Lightning-compatible crypto wallets.
  • Cash App uses the Lightning Development Kit, which was built by Spiral, another crypto unit within Block.
  • Twitter in September added the ability to pay for tips with Lightning. Lowering bitcoin’s fees is key to enabling small tips; low fees are crucial for micropayments. Dorsey left Twitter in November, but his successor as CEO, Parag Agrawal, has been heavily involved in the company’s crypto efforts.

But Lightning will have to grow beyond companies under Dorsey’s influence. Cash App and Twitter won’t be enough to solidify Lightning’s reach.

  • It’s still not clear why most people would want to pay in bitcoin. Bitcoin remains volatile — the price dropped by almost half since November — which makes using it for payment challenging.
  • Many bitcoin buyers see it as an investment, not as a payment method. You don’t spend the stocks in your 401(k) account, right? On top of that, spending bitcoin that’s risen in value can trigger taxes.
  • Early data suggests traffic on the Lightning Network is growing. But it’s hard to tell if those are payments-related transactions or simply trades that are bypassing more expensive on-chain transfers. It’s likewise not clear how much Cash App and Twitter are contributing to Lightning use.

Other crypto protocols want in on the payments business. If you own the rails, you can make a fortune.

  • Crypto payments are diversifying already. Bitcoin’s share among BitPay merchants dropped from 92% in 2020 to about 65% in 2021, according to BitPay. Use of ether increased to 15% and stablecoins increased to 13%. (BitPay doesn’t support the Lightning Network.)
  • Stablecoins, which are typically backed by fiat currency, have been touted by some as a better alternative. Their use has exploded in recent years, particularly for crypto trading, but payments use is still nascent. Even PayPal is considering its own stablecoin.
  • Bitcoin is still mainly used for luxury goods like cars or jewelry, BitPay has said. That’s not necessarily the path to mainstream usage, but it shows that people are willing to part with their coins.

Ultimately, consumers will pay with whatever’s most convenient. Merchants may show interest in cheaper payments, since they typically bear the cost, but wide acceptance and consumer interest is crucial. It’s going to be a technological race between Lightning, which can leverage the best-known cryptocurrency, and all the other crypto payments contenders.

— Tomio Geron (email | twitter)


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On the money

Fidelity has filed with the SEC to launch two crypto-related ETFs. The financial services company is launching a Crypto Industry and Digital Payments ETF and a Metaverse ETF, hoping the SEC is friendlier this time after rejecting its application for a spot bitcoin ETF. The SEC has yet to approve any ETFs that invest directly in cryptocurrencies.

Robinhood shares are rallying back after its plunge. After reporting disappointing earnings, Robinhood shares fell by 14% late Thursday. Friday saw a more optimistic look as the shares gained 9.7% — a signal that investors might be excited about new product developments, or just thought the stock was oversold.

Google is expanding its presence in India with a $1 billion investment. The tech giant is entering into a partnership with Bharti Airtel, an Indian telecommunications company. Airtel Chairman Sunil Bharti Mittal hinted that payments might be part of the partners’ plans.

Crypto’s top execs formed a PAC for the 2022 midterm elections. The PAC has already raised $5.3 million with plans to spend $20 million or more, and is looking to back congressional candidates "who work to give consumers and innovators the opportunity to build and use next-generation technologies and services here in America." It has yet to endorse any candidates, though we’d note the Congressional Blockchain Caucus is a good place to start.

Reddit is testing NFT profile pictures. In a move similar to Twitter's, Reddit is running internal tests to allow users to use and validate NFTs as profile pictures. This would allow users to use any NFTs, not just CryptoSnoos, Reddit’s own Ethereum-based NFTs.


LeBron James is the latest celebrity to sign up with He said in a press release that he wants to build resources for kids: “Blockchain technology is revolutionizing our economy, sports and entertainment, the art world, and how we engage with one another. I want to ensure that communities like the one I come from are not left behind.”

Ubisoft’s defense of its new NFT features caused even more backlash from gamers — probably because it was quite insulting. "I think gamers don't get what a digital secondary market can bring to them," Nicolas Pouard, VP of Ubisoft’s Strategic Innovation Lab, said in an interview.

SEC General Counsel Dan Berkovitz thinks the media exaggerates the fight over whether the SEC or the CFTC gets to regulate crypto. “It’s a collaborative relationship,”Berkovitz said at a legal conference. (So collaborative that the White House is starting to knock heads.)

Visa reported $2.5 billion in payments made with crypto-linked cards in its first fiscal quarter. “We will continue to lean into the crypto space and our strategy is to be a key partner to provide the connectivity, scale, consumer value proposition, reliability and security that is needed for crypto offerings to continue to grow,” CEO Al Kelly said on the earnings call.

Coming up

Jack Dorsey and Michael Saylor will talk at a Bitcoin for Corporations event on Tuesday. The conference, held by MicroStrategy, will see the two CEOs discuss the potential benefits of bitcoin. Both MicroStrategy and Block hold bitcoin in their corporate treasuries.

Tech is making sure shopping will never be the same. How? Join Protocol’s David Pierce and a panel of tech and ecommerce execs this Tuesday at 9 a.m. PT/12 p.m. ET for a conversation on how shopping works now, how the customer experience is changing and where you can innovate.

PayPal and UBS earnings calls are set for Tuesday. PYPL’s average estimated EPS is at $0.86, down 4.4% from last quarter. UBS’ average estimated EPS is at $0.24, down 61.9% from last quarter. Look for UBS to discuss its plans for Wealthfront, the Silicon Valley robo-adviser it just acquired.

The first Open Banking to Open Finance summit for the MENA region starts on Tuesday. The two-day conference features over 20 speakers and over 150 senior execs from banks and fintech companies.’s earnings call is scheduled for Thursday. BILL’s estimated EPS is at -$0.53, down 12.8% from last quarter.

The two-day Nexus Dealmakers Summit begins next Monday. The conference will host a number of meetings and networking events, ending with the Industry Awards. (As a perk, you can test-drive a Lamborghini in between meetings if you want to.)

Lehane on the brain

I was scouring FINRA licenses, SEC filings and Twitter and LinkedIn breadcrumbs all last week and he just … he tweeted it out. Chris Lehane confirmed Friday he was joining Katie Haun’s KRH Partners, one of my top guesses after he said he was leaving Airbnb for an unnamed crypto fund.

In subsequent tweets, he gave more clues about the makeup of Haun’s operation: Kindra Mason, chief of staff for a16z’s Crypto Fund III, is also moving to KRH, he said. And I noticed that Justin Gregorius has updated his LinkedIn to indicate the end of his employment as a protocol specialist with a16z, where he also worked with Haun on crypto.

— Owen Thomas

Thanks for reading — see you tomorrow!

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