Christian Catalini
@ccatalini
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Co-Founder & Chief Strategy Officer @Lightspark . Founder @MIT Cryptoeconomics Lab. Previously: Co-Creator of ≋ Diem / Libra.
Joined December 2008
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1/ Excited to unveil to the world! Over the past year, we've been working hard to enhance Lightning — making it simpler to use, smarter, and highly scalable.
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1/ Coinbase has consistently been at the forefront of crypto innovation, playing a crucial role in driving us towards mainstream adoption. It has been a pleasure collaborating with Coinbase’s engineering, product, and business teams to bring Lightning ⚡️ to
@Coinbase
in the near…
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1/ Big news! 🚀 Coinbase is now rolling out
#bitcoin
Lightning, powered by
@lightspark
. 8 years ago, Lightning was just a white paper. Today it's truly going mainstream. 🔥
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1/13 Four years ago we came together as the founding team of ≋Libra to use crypto to democratize access to the financial system. As the last person from the original ≋ founding team involved in this phase of Diem, here are some personal thoughts and reflections on the journey.
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Excited to co-found Lightspark and build on the Lightning network
#BTC
– especially with this team! (
@davidmarcus
,
@smedleyus
,
@JaiMassari
,
@jevering
,
@kphur
, Tomer Barel). More at !
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New
@federalreserve
@FedResearch
on stablecoins by
@gordonliao
and Caramichael borrows heavily from work we released last year... misses a few citations! ;) — November: December: and
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1/ The US risks squandering its technological leadership in the crypto domain. The
@WhiteHouse
's economic report exemplifies the insufficient research conducted to offer a balanced perspective on its underlying economics:
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Thanks
@tylercowen
for the post! Great questions, here are replies to some of them. All the issues you raise, and especially those we have not addressed directly, will be formalized by the Libra Association
@Libra_
after gathering feedback from everyone in the ecosystem. 1/15
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The crypto "idea factory" is finally here! Congrats
@Tim_Roughgarden
@danboneh
@benediktbuenz
@skominers
@lera_banda
@AriannaSimpson
@alive_eth
@cdixon
@sriramk
! The talent this team will bring under the same roof...
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Looking forward to presenting our research on ICOs at the SEC this morning!
#cryptoeconomics
@SEC_DERA
@SEC_News
@MIT_Cryptoecon
@MITSloan
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Today
@lightspark
welcomes
@xapoprivatebank
to the Lightning network! ⚡️ We're excited to work together towards a future where value can move without friction on a truly open network.
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None of this would be possible without a vibrant ecosystem✨of amazing customers & partners! Announcing today: the largest crypto-assets platform in the Middle East:
@rain
; merchant support:
@FlexaHQ
; risk management & compliance:
@chainalysis
@notabene_id
@trmlabs
. More soon!
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1/5 Exciting day
@DiemAssociation
! We are pleased to announce a partnership with
@silvergatebank
.
@silvergatebank
will become the exclusive issuer of the ≋USD stablecoin and will manage the ≋USD reserve.
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Today we’re releasing the
@lightspark
Wallet SDK — now it’s extremely easy to build a delightful payments experience into your product!
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1/8 The word stablecoin has become somewhat of a misnomer, as it is currently being used for a range of coins with drastically different economic properties. We discuss robust economic design w/
@alonsodegortari
:
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@gavinandresen
Isn't there a trade-off between the two? Store of value can live with high variable costs (transact more rarely), but benefits from high decentralization (high fixed cost). Medium of exchange needs low variable costs, but that comes at the cost of more centralization?
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1/ What should stablecoin reserves look like? The President's Working Group solution limits innovation to incumbents. With the amazing
@theshah39
we offer a solution that can protect consumer and financial stability without stifling competition and innovation!
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1/ Following yesterday's
@SenateBanking
hearing on
#stablecoins
, here's a summary of the opportunities and challenges (w/
@alonsodegortari
&
@theshah39
):
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2/ Lightning can become the open protocol for money that the Internet has long needed. It's massively scalable, low-cost, offers instant settlement and full interoperability for all participants. All of this is built on the most secure and decentralized blockchain:
#Bitcoin
.
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@trev
@AGoToGuy321
@lightspark
@FlexaHQ
@davidmarcus
@smedleyus
Feeling is mutual!
@trev
& team are incredibly talented. More to come! ⚡️🔥
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Blockstream's ambitious attempt to use satellites to beam bitcoin nearly anywhere in the world.
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1/13 "For competition to thrive, a truly interoperable payment system is needed [...] Today, consumers and merchants are locked into "walled gardens". Moving money between banks is expensive, and moving it between digital wallets is often impossible."
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Universal Money Addresses (UMAs) — an open source standard for money movement💲 to look and feel like sending an email 📨. Today it’s yours to develop on. Excited about what developers, wallets and platforms will build & invent with it. Discover more at:
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When do you actually need a blockchain? It all comes down to some simple economics
#blockchain
#cryptoeconomics
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Initial Coin Offerings and the Value of Crypto Tokens w/
@joshgans
now available for download!
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3/ The beauty of Lightning lies in its foundation on
#Bitcoin
's safety and security principles. There's no sidechain, no need to trust a new set of validators, and no sequencer requiring future decentralization.
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Economics of
@Libra_
: 1) reserve and stability 2) transition to permissionless 3) market design
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13/13 My hope is that the Libra/Diem journey, research papers, and open source code will be useful for entrepreneurs and developers writing the next chapter of crypto — Nunc pede libero pulsanda tellus! 🚀🌕
1/7 From the statement by the CEO Stuart Levey on the sale of the Diem group's assets to Silvergate — “From the outset, the Diem project has been focused on leveraging the benefits of blockchain technology to design a better and more inclusive payment system.
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15/ This is why we're thrilled about the convergence of Lightning and AI. AI will exponentially increase the velocity of money on the Lightning network while delivering low latency and high reliability.
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1/ Imagine a world where you can send and receive messages irrespective of the messaging app you use. Same with sending and receiving money, reading updates from your social or news feed, finding the right product or service, or interacting with an AI agent.
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Looking forward to discussing robust stablecoin design and how Diem can contribute to financial inclusion, competition, and innovation in payments and financial services at the Digital Euro Summit
@bitkom_block
@bitkom_finance
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"The Blockchain Effect: Network Effects without Market Power Costs"
@cgbarrera
's insights on research w/
@joshgans
on the economics of blockchain
#cryptoeconomics
@MIT_Cryptoecon
@MITSloan
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Diem says it will ‘fade out’ stablecoin if Fed issues CBDC
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"Slack Time and Innovation" paper has been accepted for publication in Organization Science! w/
@ajayrotman
@avicgoldfarb
Hong Luo
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11/ We introduced a novel metric: "conductivity." Drawing from physics, where conductivity measures a material's ability to conduct electric current,
@lightspark
's conductivity metric quantifies a Lightning node's capacity to effectively transfer value across the network.
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We're looking for extremely talented economists to expand an already exceptional team working on the economics of Libra
@Libra_
@alonsodegortari
@andrewlilley_au
@asadliaqat
@RobDonnelly47
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1/6 Three non-mutually exclusive paths to "upgrading" money to achieve more competition, inclusion and innovation in financial services: (1) True Stablecoins, (2) Deposit (Stable)coins, (3) CBDCs on multiple rails
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Diem is designed to complement public sector innovation in payments and CBDCs, increase competition in payments, and reduce costs and frictions for consumers and businesses
@DiemAssociation
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We're looking for an extremely talented and driven Senior Data Engineer to join our team of AI, econ and data science super nerds!
@lightspark
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4/ Of course, this comes with a trade-off: liquidity is locked in pairwise channels, and you need to efficiently transfer value through a network graph. If you encounter a path lacking sufficient liquidity, the payment fails.
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19/ Since the archive came out today: "Simple can be harder than complex: you have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains." — Steve Jobs
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Thanks for including "Some Simple Economics of the Blockchain" on the
@a16z
reading list!
@MITSloan
@rotmanschool
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Not all stablecoins are created equal... and sadly if you're at risk of a death spiral you will eventually see one (w/
@alonsodegortari
):
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Lifting stablecoins' quality standards for consumer protection, financial stability and compliance will require a public-private partnership. Which is why we've committed to phasing out ≋USD when a CBDC becomes available
@DiemAssociation
@Luohan_Academy
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Early preview 🚧 of what Universal Money Addresses (UMAs) will unlock. Transactions traveling across 4 continents, 4 wallets (🇺🇸🇬🇭🇦🇷🇵🇭), 5 currencies (USD, PHP, GHS, USDC,
#btc
). Money movement as simple and interoperable as email. Lots of work ahead, but we’ve ignited⚡️a spark!
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No transaction is too small! — and crypto X never fails to discover an Easter egg 🥚⚡️
#bitcoin
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18/ We invite you to test our product and help us refine and improve it. Only with the support of the entire community we’ll be able to simplify and scale Lightning so that it can become the Internet's open protocol for money.
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6/ So how do we navigate this trade-off? Scaling Lightning hinges on capital efficiency, and achieving that means ensuring liquidity is available where ⚡️and when⚡️it is needed.
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1/4 Why is the United States Lagging Behind in Payments? With
@andrewlilley_au
, we argue that while the US plays a key role in the global financial system, its payments system lags behind the global frontier.
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8/ As a new participant joins the network,
@lightspark
optimizes its connections. This is a network theory problem: you are adding a node to the graph, and want to ensure that it is positioned for maximum performance.
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Bitcoin fees are rapidly increasing. Integrate Lightning ⚡️ today with
@lightspark
before it's too late. No monthly fee for startups and developers. Integration takes hours, not days 🔥
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17/ Today we're showcasing an example of what is possible: streaming money from users to creators in real-time, in tiny increments. Applications range from global, business-to-business transactions to completely new content monetization models.
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The most important part to restore confidence: “Circle, as required by law under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
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7/ When framed as a prediction problem, AI's potential to help Lightning scale becomes clear. But before we get there, there are few intermediate steps.
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"Blockchain Adoption and Digital Privacy"
@cgbarrera
's advice for entrepreneurs in the
#blockchain
space w/insights from our work on digital privacy w/
@ce_tucker
&
@Susan_Athey
@MIT_Cryptoecon
@MITSloan
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5/ While you may be tempted to throw liquidity at the problem, this quickly becomes costly and undermines one of Lightning's core advantages: low fees!
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10/ "If you can't measure it, you can't improve it," as Peter Drucker supposedly said. In the context of the Lightning Network, many aspects were not well measured. Before we could optimize a node's position, we first needed to go back to basics and develop better measurement.
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A Log scale puts everything in perspective.
#Bitcoin
's steady rise as a network and the foundation of the digital asset economy is undeniable.
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12/ By optimizing conductivity and dynamically adjusting our customers' connections, we ensure they are key players on the Lightning network.
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What would it take to make stablecoins... actually stable? w/
@alonsodegortari
. Plus talks by
@DuffieDarrell
,
@glenweyl
, Civelli, Schilling, Veneris... @ Workshop on Distributed Ledger & Economics organized by
@silviomicali
& J. Chen
@SBUeconomics
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"The goal of private money is to be accepted at par with no questions asked" - while Gorton and Zhang's WP gets some of the facts about
#stablecoins
wrong, their solutions are very consistent with how we've been designing Diem all along, including replacing ≋USD with a CBDC.
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My conversation with
@scottmelker
on why now is the time to build interoperable payments on the only open protocol for money we have: the
#bitcoin
network!
@lightspark
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14/ Better measurement not only enhances your conductivity but also ensures high payment success rates, regardless of the network region you're trying to reach.
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How should a utility token issuance be valued, and how does it compare to the value of an equity offering? by
@shurder
#cryptoeconomics
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16/ Bitcoin won't remain idle in Lightning channels; it will be put to work as developers worldwide explore what's possible with a truly open and interoperable protocol for money.
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9/ What performance really means depends on your business objectives — factors like the ratio of sent to received payments, average transaction size, and a lot more.
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If you wanted to drastically accelerate progress towards a CBDC you could take the Diem codebase and use it as the base for programmable, public sector payment rails. It’s open source, supports most features you’ll need, and was built by top engineers
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Top 5 papers on
@SSRN
include two on blockchain and tokens: and both w/
@joshgans
@MITSloan
@rotmanschool
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13/ But connection optimization alone isn't enough. We also need an accurate, relevant, and real-time view of network liquidity. Otherwise, payments may hit a route lacking liquidity and fail.
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Excited to see our research on ICOs cited in the opening remarks of the chairman of the House Subcommittee on Capital Markets, Securities, and Investment
@MITSloan
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The 2018 Joint Economic Report by Congress () calls 2017 "the year of cryptocurrencies", and references our work on the economics of the blockchain w/
@joshgans
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Key economic updates in
@Libra_
's new WP: (1) Single-currency stablecoins, e.g. ≋USD, ≋EUR, ≋GBP; (2) a redefined multi-currency ≋LBR based on fixed nominal weights; (3) more protections for the Libra Reserve under extreme market conditions, including a capital buffer;
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1/8 Key misunderstandings in
@JosephEStiglitz
’s piece on
@Libra_
: the reserve is designed to build on the progress central banks have made in ensuring stability and value preservation. Libra is a complement to their monetary policies, not a substitute.
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Readings, slides, research and a live demo of a blockchain at
#blockchain
#cryptocurrency
#economics
@MIT
@MITSloan
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11/13 Today we pass the baton to Silvergate. They have been one of the first Federal Reserve member banks to understand the potential of crypto, and are now in a great position to bring a stablecoin to market that follows the PWG framework.
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1/ Unfortunately, the Terra/Luna collapse was entirely preventable. Our analysis, circulated among regulators, policymakers, and academics many months before the crash, exposed the design's inherent weaknesses.
#DoKwon
#terraluna
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1/12 More than a decade in, most economists still fundamentally misunderstand
#Bitcoin
, cryptocurrencies,
#DeFi
and
#NFTs
. In a piece for
@ProSyn
with
@skominers
and Ravi Jagadeesan, we write that:
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As part of the economic design of Diem, we've been pushing for better reserve quality standards for years. Great to see the market responding with more transparency and higher quality backing. - Paper on robust stablecoin design:
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1/ What are the key economic building blocks of Diem?
@DiemAssociation
: similar dynamics to a standard setting organization. Coordinates investment in shared infrastructure and tech, avoids tragedy of the commons, supports financial inclusion projects.
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1/4 Do Crypto Prices Actually Mean Anything? —
@wu_jane
and I discuss in
@HarvardBiz
how a focus on the wrong metrics has led crypto astray... and what can be done to fix it!
@uclaanderson
@MITSloan
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1/3 One more piece for our stablecoin series, this time focused on why the public sector should see stablecoins as an opportunity rather than a threat. — With
@wanyidaili
,
@alonsodegortari
,
@andrewlilley_au
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12/13 I'm extremely excited to jump back into the crypto 🐇🕳️. This space is as exciting as it has ever been, and we are very far from realizing its potential when it comes to unbanked segments of society and increasing competition in digital platforms.
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5/ In the internet's early days, France had a state-run service called Minitel, offering news, directories, and e-commerce. Consequently, it was slow to adopt the internet — Minitel was sufficient, and no new infrastructure was needed! Does this sound familiar?
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1/3 One step closer to Satoshi’s vision: experience seamless value streaming from viewer to creator.
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1/6 "Unfortunately, today’s letter from lawmakers to Facebook misunderstands the relationship between Diem and Facebook. Diem is not Facebook. We are an independent organization, and Facebook’s Novi is just one of more than two dozen members of the Diem Association [...]
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3/13 We started with a very bold — and possibly ahead of its time — white paper that had a number of gaps, but was also responsible for accelerating progress on the public sector side towards central bank digital currencies. We followed with our own fair share of mistakes...
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I hope we didn’t disappoint you… 🌶️ 🌶️ 🌶️ Always be wary of anyone asking for a ban of a new technology. Historically those perspectives don’t age well. Do your own research.
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1/2 In the summer of 2021, we wrote a paper outlining the key weaknesses of algorithmic stablecoins, and how they inevitably lead to death spirals. The paper and insights were widely shared with regulators, academics, & industry participants well before the Terra/Luna meltdown.
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Market makers should be on Lightning. It lowers their cost of capital and once stablecoins are on Lightning too it will become the perfect, open trading infrastructure. Channels are great for posting collateral.
Arbitrage between exchanges is going to get a whole lot faster and cheaper, especially during those parabolic
#BTC
moves of the bull market.
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