In this episode, Chris Ritter joins me to discuss Lightning Network economics, yield opportunities, network centralization, and the rapid growth of Lightning payments. We explore who captures value in the Lightning Network, security considerations for routing nodes, and what recent data reveals about the future of Bitcoin payments.

Timestamp:

(00:00) – Introduction to Lightning Economics

(04:23) – Understanding Bitcoin Treasury Strategies

(09:08) – The Evolution of Lightning Network Routing

(14:45) – Growth and Volume in the Lightning Network

(19:57) – Centralization Trends in the Lightning Network

(25:08) – Security Considerations in Lightning Routing

(29:18) – Yield Generation in Lightning Network

(35:05) – The Future of Payments and AI in Lightning

(41:34) – Closing Thoughts

Links: 

• https://zeusln.com/
• https://freecritter.xyz/
• https://x.com/ZeusLN
• https://primal.net/freecritter
• Report: https://zeusln.com/Lightning_Economics_Report_April_2026.pdf 

Stephan Livera links:

• Follow me on X: @stephanlivera
• Subscribe to the podcast
• Subscribe to Substack

Transcript:

Speaker 1 (00:00.108)
Hi everyone, and welcome back to Stefan Livera podcast. Today I’m joined by Chris Ritter, Chief Strategy Officer at Zeus.

And we are going to be talking a bit about lightning economics and yield on the Lightning Network. And now maybe longtime listeners you’ll know that you know, there have been people talking about this idea for years and years and years. I think like one of the first few episodes back in like, you know, episode seven or something of my podcast, I had Nick Batia on you know, this is back in twenty eighteen. So th this conversation has been ongoing.

but Chris is joining us and Chris recently wrote this piece called Lightning Economics. It’s a report for Zeus. and I thought there were some interesting stats and things to pull out from it. So first off, Chris, welcome to the show.

Speaker 1 (01:18.526)
Full circle, yeah, and you never know who’s listening, as I as I often say nowadays. so look, let’s just start I guess let me set a little bit of the context for people, at least how I how I read this situation, and then you can maybe add on from there. So there are already certain treasury companies and people doing some related things. So obviously there is LQWD in Canada, they’re a Bitcoin treasury company doing routing as part of their model. There’s B hodl in the UK, and also Block.

Right, so I think one or maybe two years ago, one or two years ago, Miles from Cash App, Block, Square I guess the overall company is called Block, he came out and talked about his numbers in terms of the yield. And so that was kind of like, whoa, actually there’s like there’s there’s some volume here in Lightning. And so that was kind of interesting for people. And then now Zeus is a you know, a well known lightning wallet. Let’s say most people know it as a lightning wallet, although obviously there’s more to it. so

Can you kind of jump off from there? Tell us a little bit about why you went and made this report.

Speaker 1 (04:44.856)
Gotcha. So yeah, as you as it’s an interesting way to break it down, as you said. so when most people are thinking about a Bitcoin company or some kind of Bitcoin business or a Bitcoin treasury strategy, I guess there’s different ways to think of that. It’s either just you are just earning, you know, Bitcoin directly, like if you are a Bitcoin company that is doing a Bitcoin service, or you could just be, you know, like a SpaceX or you know, like you could just be earning money and just buying some Bitcoin. And

Speaker 1 (05:14.894)
An operating company as opposed to a company trying to make sats from sats per se. and then so that’s kind of on the operating as you said, on the operating company side of things. And then I guess you’re also getting to this question of Bitcoin is just sitting there. And this is actually a common line of criticism. Hey, Bitcoin has no yield. And therefore the gold bugs and other or whatever else. I mean, maybe not so much gold bugs, but other people in TradFi will look at the Bitcoin industry and say, Hey look, this Bitcoin thing

There’s no yield. How would you answer that?

Speaker 1 (06:49.678)
Properties. I see. Yeah. and now probably another common confusion will just be if people are coming from the world of Bitcoin treasuries, they may be thinking of bit of the concept of BTC yield. And that may be more like that’s different to this kind of to lightning yield. So can you just kind of explain for people the difference there between, let’s say, when Michael Saylor with strategy either issues common equity, MSTR equity, or

you know, makes money out of stretch, STRC, and then uses that to buy Bitcoin and that’s considered BTC yield from their perspective. What are you talking about when we’re talking about lightning network, you know, yield?

Speaker 1 (09:25.87)
On a lightning routing perspective, in the early days, it was seen more like a a hobby kind of thing, right? It was seen as you know, because the the common understanding at that time was like, hey, run your your Umbral or your MyNode or some or Raspy Blitz or something like this, and just kind of manually open channels to people, and people would just kind of say, Hey, I’m doing a lightning store. Can someone here’s my lightning pub key, can someone open channels to me? ‘Cause I need some inbound.

Right, that’s kind of like in the early days of lightning before things had professionalized. And then over time there was a maturation process where then actually some nodes started to say, No, I’m actually not gonna open channels to you because I need them to be above a certain size. I need you know, because a channel is not a channel, right? It matters where it’s pointed and how much actual turnover you’re getting through that. So do you wanna just elaborate a little bit on the maturation in that space, the professionalization of running lightning nodes?

Speaker 1 (11:56.174)
Now might also be a point that look in the early days of Lightning there wasn’t as much volume simply. Now what we’re starting to see as and you refer to it in the report also, I think River have d been doing like a yearly thing where they go out, they survey a bunch of large Lightning node operators and then they kind of extrapolate based on that. what’s the approximate volume? So I think in your report you you cite that number here. River estimates Lightning processed one point one seven billion in November twenty twenty five.

Driven primarily by exchange to exchange flows rather than retail micropayments, volume grew two hundred and sixty six percent year on year. Now, as we speak, it’s June twenty twenty six. So can you just comment a little bit on the growth in the payments volume and turnover in Bitcoin’s Lightning Network?

Speaker 1 (14:57.42)
The other interesting concept that most people won’t it’s not intuitive if you’re not a professional or not really deeply in into this industry is just the sheer amount of turnover that’s happening, right? Because people will look at, it’s five thousand or six thousand BTC locked into the lightning network channels. But actually, I I think off the top of my head I remember from that River report or chatting with Sam Wootis from River, it’s like turning over like three times, you know, like a month kind of thing. Like that’s it’s something like that.

What a what have you found?

Speaker 1 (17:23.192)
So as I’m reading you, it’s like because there’s so there’s such high velocity in terms of lightning and it’s growing, as we mentioned, the volume, even off smaller initial capital amounts, people can still bec they can turn it over many more times. Now, I guess the only probably while the probably the big question, and I’ve asked this also when I was chatting with you know Bitcoin Treasure companies who are doing this kind of thing, I guess there is the question of

If you were to just, you know, add a lot of Bitcoin to the Lightning Network over time, that yield percentage might come down over time. Right? Absolutely. So i you know, i so that like when people are reporting the number of ten percent or fifteen percent lightning yield, you know, maybe that’s just because now it’s early and there’s still like a lot of this volume to go. If you were to like really oversaturate the network with BTC in the lightning channels, then

maybe the yield percentage would have to come down because now you’re you know, like put it this way, you some of those yield numbers might be picking the low hanging fruit. And then as you go up, you’re going h higher and up the tree, you’re getting less yield.

Speaker 1 (20:06.688)
And in terms of as you mentioned the point around your position in the network, right? Or people in Lightning might mention this centrality idea. Like people look at what are the more connected nodes on the network. So as an example, Async, the creators of Phoenix Wallet, Kraken, Wallet of Satoshi, CoinGate, OneML, like these are some of the large ones. Obviously, you guys over at Zeus with Olympus, Block, obviously, LQWD, because they are also doing this kind of thing. So then

I guess the other element is do you have a business that benefits or relies on that? Right? Because if you’re running a lightning service, obviously, you will be in a position where you’re in your you’re you are well placed to actually clip some fees on the way because maybe you’re running an LSP or a wallet or an exchange where there’s lots of volume passing through, right?

Speaker 1 (22:41.954)
The other interesting one, and I saw this in your report also, because this was kind of an argument in the early days of Lightning as well, because many of us, let’s say, small blockers would be arguing with B cachers, and one of the talking points was, hey, Lightning Network is gonna be a Hobbit Spoke, it’s gonna centralize. And I think begrudgingly there’s probably some truth to that, at least some truth to that, I’ll say. Like it’s it’s not you know, you still can set up your own Lightning node, but it’s fair to say

And you c you qu I’m quoting from your report here. The Lightning Network is centralizing. The data is unambiguous. Research finds that ten percent of nodes hold eighty percent of network capacity, and the top fifty percent hold ninety nine percent. The Gini coefficient for node strength measured zero point eight eight in twenty twenty, and by twenty twenty five it had reached zero point nine seven. so hub formation is a structural consequence of lightning’s design. So can you just explain and elaborate a bit on that?

Speaker 1 (24:37.782)
Yeah, and just to I guess explain that a little bit, at least my understanding of Lightning today is your Lightning node has a view of the network. It has like a network graph and it calculates its own routes and it can sort of go, I’m gonna route this way, and if it doesn’t work, I’m gonna retry another route. I’m gonna route through this this and that a nodes A, B and C instead of, you know, whatever, E F G or whatever. So the that’s kind of the nature of the Lightning Network. And so that’s an interesting component of it.

And what we’re also seeing is this concept of like other L2s are kind of using Lightning as their as their rail, like as their kind of last mile also. and so it’s kind of starting to reach a point where a lot of wallets are starting to have a lightning address and it’s kind of assumed, okay, I can just make a payment to whatever, Chris at Zeus or whatever. and so that is kind of also showing this network effect of lightning is growing.

And in a way, to be fair, different to what many of us would have thought, right? Because what many of us would have thought, it’s like you gotta have like your umbrella and your my node or your Raspberlitz back at home and your you know I mean, at the funnily enough, funny story, at the first Lightning Conference in Berlin, approximately October twenty nineteen, I had Zeus wallet and it was connected back to like my L like my L and D on my Lightning node back at home in Sydney at that time.

And I was using Zeus to make that payment and it was like it was over tall, so it was kind of slow and you know, I I won’t I wasn’t the most professional but anyway, I still got the payment done and but that’s kind of that’s how far things have come nowadays. do you wanna just elaborate a little bit on the safety part? Because I think that’s also interesting for people because obviously it’s not the same thing as keeping your sats on your cold card offline. There is a security consideration with

lightning routing, being an LSP or doing this kind of service. Can you elaborate on, you know, methods of keeping it secure? Is it things like VLS? Is it things like what the async guys are doing? Is it you know, what are some of the ways that the professionals are keeping their keys online but still secure?

Speaker 1 (29:22.836)
On the Olympus side of the house for you guys, ’cause obviously there’s Zeus, the wallet, the app, are you like what services are you guys offering as Olympus? Like are you offering like LSP services or like put your Bitcoin with us and we’ll help we’ll partner to do yield or lightning routing? What what are the services you’re offering on the Olympus side of the house?

Speaker 1 (31:30.124)
Interesting. So as you said, five point six percent, and that’s what I see in the report. So theoretically, and you’ve got here ten BTC. So I guess that’s just to be clear, that is annualized and in Bitcoin terms, yeah? Yes. So then as an example, as at the ten Bitcoin, five point six, so theoretically in a year with ten BTC, you’ve earned point five six BTC just in the routing fees. And is that accounting for the like channel open and close fees and all those other things, or is that

Like basically is that a net or a gross figure?

Speaker 1 (32:21.026)
Have you had interest from just like capital providers? Like people who are like, Hey, I don’t even have a business, but can I just come and put Bitcoin with you and earn yield that way or we we share on the yield? Have you had people like that or not really?

Speaker 1 (33:48.15)
Yeah, and I like I’ve been commenting about this recently as well, that I think even this so called debate p between so called MOE and SOV, like it’s a fake fight. Like it’s really it’s actually fake. It’s honestly it’s like yes, people argue about it online, but i you know, in the real world, in practice, it’s you know, people are not actually seriously fighting and arguing about that. Like it’s just not a thing. Now, I you know, I think you could say it’s

descriptively true that the SOV phase will kind of happen more so before the MOE phase. I think that is true. But nevertheless, I’m still happy to earn and spend Bitcoin. Most Bitcoin people I know, even SafeSeen has, you know, lightning payments on his website, right? So it’s not that he or other people are like actually against using it as MOE. Maybe there’s Danhild, okay? I’ll give you Danhild. He’s one of the ones who has been actually like saying, No, merchant adoption is not the thing and

Fine, but that’s like one person out of basically anyone else in kind of Bitcoin ecosystem land who has kind of spoken against let’s say the MOE use. Whereas in practice, remember, there are people who want to earn Bitcoin too. And how do they earn? Well, you either had to like directly earn it or you had to buy it or you had to mine it. I mean that’s you can either buy Bitcoin, you can mine it, or you can earn it. I mean that’s that’s how else are you gonna get it, right? So

The these are so to me it’s a fake fight, you know, I just think it’s this kind of you know, people sometimes talk online just for you know now, there’s kind of different nuances to it of like the capital gains tax thing and the different aspects of like what was tried and what will work and what should you build a business on versus what is, you know, going to be easier to build a business on right now. Right? but yeah, as I said, I I think for the most part it’s a fake fight.

At least is how I see it. So the other actually speaking of payments, I mean the super hot thing nowadays, AI, right? Like everyone’s talking about it. I mean, rightly so, it’s a big thing, everyone’s using it. I’m using it, I’m sure you’re using it, everyone’s using it. There’s been a lot of talk about agentic payments. Now, some of that has come from, let’s say, shitcoin land or stablecoins where they’re kind of like, my base and my USDC and whatever. What about in Lightning? Are you hearing or seeing much of a gentic payments in Lightning?

Speaker 1 (37:12.308)
So maybe it’s it’s more of a narrative than fact or reality for now at least, the agentic payments aspect of it. But the other interesting part is just AI to implement lightning, right? Like we’re starting to see more of that. Like people can just like take an SDK that exists out there and like vibe code lightning support, you know, very quickly. Right? Like I just did it the other day with like Breeze SDK just to play around. Right? So that’s maybe another element that people are now

You know, obviously there’s Breeze S D K, there’s I think L D K and there’s I’m sure there are other there’s Phoenix D. So I guess are you seeing on the Zeus and Olympus side of things, is there anything that people can use to sort of vibe code A you know, lightning support or, you know, AI code like with I don’t know, MCP or Skills file or whatever? Like is there something you’re doing on that side?

Speaker 1 (38:12.994)
They’re another example, yeah.

Speaker 1 (39:34.24)
Excellent. Now on the consumer, you know, on the app side, like on Zeus wallet, can you give us any updates there? I saw recently, you know, there’s been this kind of idea of a graduated wallet and I believe you have eCash, right? Like you have automated e cash, it automatically selects a mint in the background and then you quote unquote graduate up to self custody lightning. Tell us a little bit about that side of things.

Speaker 1 (41:31.17)
Fantastic. Well I think that’s we’ll leave it there. We’ll try to keep it tight for the listeners so they can find out for more for themselves. I will include the links in the show notes, but it’s Zeusln.com, the Lightning Economics Report from April twenty twenty six. That’s the main thing we’ve been speaking of. and Chris, thanks for joining us today.