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Lightning Strikes: Coinbase 🤝 Lightspark

Your weekly Bitcoin update, from Apollo

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Lightspark ⚡️ Coinbase

⏩️ One-liner

Lightspark announced a partnership with Coinbase to bring the Lightning Network to the exchange.

🔍️ Closer Look

Lightspark is a Lightning infrastructure company founded by David Marcus and Christian Catalini, and it builds products that enable enterprise-scale payments over the Lightning Network.

While public details of the partnership with Coinbase are thin, Lightspark says that “Coinbase customers will benefit from instant, cheaper transfers.” This presumably means Lightning deposits and withdrawals.

Coinbase will use Lightspark’s remote-key signing implementation, whereby Lightspark hosts the Lightning node, but Coinbase retains the keys (and can sign ‘remotely’).

Coinbase CEO Brian Armstrong first announced the decision to integrate Lightning back in September 2023.

While this has been a long time coming at Coinbase and is big news given their size and influence, they are far from the first Bitcoin exchange to adopt Lightning.

Other US-based exchanges that support Lightning include: River, Kraken, Cash App, and Strike.

While several international exchanges like Relai, Bitfinex, and Pocket also allow Lightning withdrawals.

📖 Some History

Coinbase adopting Lightning could be seen as the coda to a long-running controversy that dates back to the ‘Blocksize Wars’ of 2016-17.

Very brief and incomplete background:

  • The Blocksize Wars were fought by two factions of the Bitcoin community over the size of blocks on the Bitcoin blockchain.

  • One side (Large Blockers) believed that the size should have been increased, to allow for more transactions per block, and reducing fees.

  • The other side (Small Blockers) believed this posed risks to Bitcoin’s decentralization and opposed the change.

  • It is generally accepted that the Small Blockers ‘won’. While the block size did increase due to the Segwit soft-fork, the Large Block movement was not satisfied and ended up hard-forking and creating Bitcoin Cash. The leaders of that movement essentially left ‘Bitcoin’ for that chain (and others).

What does this have to do with Coinbase? Well, back in 2016 (and throughout the War), Brian Armstrong was a Large Blocker and Coinbase was on the Large Block team.

The details of Coinbase’s involvement can be found in the best book on the subject, Jonathan Bier’s The Blocksize War.

Long story short, the fact that Coinbase is adopting the preferred scaling solution of what was the Small Block movement (for now, Lightning), can perhaps finally put this feud to rest.

Weekly snapshot of Bitcoin ETF flows

📈 Biggest Stacker: Blackrock (IBIT), with ~12k BTC inflows.

📉 Biggest Loser: Grayscale (GBTC), with ~11k BTC outflows.

🧮 Net Total: ~7.3k BTC inflows

Don’t miss our daily newsletter tracking institutional BTC flows!
➡️ Subscribe to Flow State.

This week’s Nuclear Take is a piece I wrote for Bitcoin Magazine about the history of Executive Order 6102: when FDR seized all the privately-owned gold in 1933.

In it, I trace the legal precedents that gave him the power to issue EO 6102, and show that it’s part of a century-long trend of US Presidents abusing ‘national emergencies’ to trample individual rights.

Could it happen again? Could a modern FDR issue another 6102 to seize Bitcoin? Read the article to see what I think!

— Julian