Elizabeth Stark is the co-founder and CEO of Lightning Labs, a company that “scales blockchains” based in San Francisco.
She is also a fellow at Coin Center, a non-profit research center for advocating and developing sound government policy regarding Bitcoin, Ethereum, and other decentralized technologies; an advisor at Comma.ai, a company that develops a self-driving kit for cars.
Also, she is the co-founder of the Open Video Alliance, a coalition of people and organizations promoting free expression in online video.
Check out our other profiles:Andreas Antonopoulos, the Bitcoin Sherpa
In this article, let’s delve into who is Elizabeth Stark and much more about her in detail.
Table of contents
- Life, education, and professional engagement
- Stark’s take on Bitcoin’s problems
- Lightning Network – Layer Two
- A network of channels
- Lightning as a contracting system
- Lightning across blockchains
- The penalty system – a potential major drawback
- The verdict
Life, education, and professional engagement
Born in Brooklyn, New York, Elizabeth got her J.D. in law from Harvard University. She continued to become an affiliate of Harvard’s Berkman Klein Center for Internet & Society.
Her ties to academia did not end there, however, as she has been a visiting fellow at Yale’s Information Society Project, and has taught at Stanford and Yale about peer-to-peer technology, the future of the Internet, open-source software, the issue of online privacy, and much more.
At Stanford, she started the Ideas for a Better Internet Program in order to engage students in building and developing ideas for the betterment of the Internet.
Elizabeth was also an entrepreneur-in-residence at Stanford StartX and has worked as a mentor for the Thiel Fellowship, intended to provide financial and guiding support to students under the age of 23 who want to drop out of school and pursue other activities which could involve building a startup, scientific study and research, working on a social movement etc.
Stark is an active contributor to the Bitcoin community; whether that is through advising startups in various areas ranging from blockchain technology to cryptocurrencies — and even artificial intelligence, or through the work she does in developing the Lightning Network.
Currently residing in San Francisco, California, Stark has lived and worked in Berlin, Singapore, Paris, and Rio de Janeiro, and speaks three foreign languages (French, Portuguese, and German). Outside of her interest in technology, Stark describes herself as an “avid listener of electronic music.”
Stark’s take on Bitcoin’s problems
Bitcoin was invented in 2008 and was presented to the broader public through its whitepaper, written under the alias Satoshi Nakamoto, titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
What has been called “the biggest invention since the Internet” took the world by storm, and introduced a way to transfer data and exchange value over the Internet without the need to rely on trusted intermediaries. A revolutionary concept for sure; Bitcoin is an attack-resistant, completely encrypted, trustless, decentralized payment network.
However, much like any other technology in its infancy, Bitcoin (along with its underlying backbone – the blockchain) has a long way to go.
In an interview given as a part of Manuel Stagars’ documentary titled “The Blockchain and Us”, Stark addresses what she considers to be the three major problems surrounding the blockchain technology and Bitcoin’s integration in day-to-day micro transactions:
Bitcoin’s blockchain is a distributed public ledger – or a historical record if you will – of all transactions that have ever occurred. Every time a node tries to execute a transaction, that information is passed on to all other nodes in the network.
It becomes obvious that all this back-and-forth traffic is bound to cause problems proportionate to the number of transactions; the maximum transaction processing capacity is estimated to be from 3.3 to 7 transactions per second on average.
At times when the number of transactions exceeds this range, the average block creation time of 10 minutes and the block size limit of 1 MB coalesce along with it to form a bottleneck.
In other words, the mere success of Bitcoin brings out this issue of scalability, and it must be properly addressed in order not to discourage the further adoption of the cryptocurrency.
2. Time delay
As we mentioned, a new block is generated every 10 minutes. This is what creates a time delay in transaction confirmation; block sizes are limited, and when a block is filled with transactions, the remaining transactions that exceeded the block’s capacity overflow in a queue (called “the bitcoin mempool”) to await confirmation by miners.
Understandably, the bigger the rate at which transactions are sent to await confirmations, the bigger the percentage of them that will get stuck in the mempool. The average confirmation time had an all-time peak this January, at 11,453 minutes or almost 8 days.
The confirmation time delays along with the skyrocketing fees they brought resulted in a pivotal moment for Bitcoin back in August 2017, when, as a response to the issue, the blockchain was forced to split in two (a phenomenon known as a “hard fork”).
Thus, a Bitcoin spin-off was created, known as Bitcoin Cash. Another fork made later that year in October spawned yet another crypto asset – Bitcoin Gold.
As you probably know, Bitcoin miners solve complex cryptographic puzzles to process transactions and add them to the blockchain. For the time and energy they invest in the process, they are paid in bitcoin. This payout is a combination of Bitcoin’s block reward and transaction fees.
In December 2017, the total value of transaction fees paid to miners reached more than $11 million for one day. And while high transaction fees are proving to be profitable for the miners, they pose a problem for the everyday user.
Namely, large fees might seem reasonable for bigger transactions, but they present a serious drawback when we think about micropayments.
Even though significant efforts are being made to address this nuisance (SegWit for example), they need to be fully integrated as fast as possible, as micropayments may be the inevitable future that comes with the adoption of Bitcoin.
According to Elizabeth, the solution of all these issues lies in introducing a second-layer protocol for Bitcoin that defers the broadcasting of transactions to the blockchain, thus allowing for transactions to clear much faster, but doing so in a manner that doesn’t clash with the principle of decentralization.
This protocol, as presented by Spark and Lightning Labs, is called the Lightning Network.
Lightning Network – Layer Two
“Our mission is to build the next generation of decentralized, resilient financial infrastructure. We believe systems based on cryptography, blockchains, and smart contracts will enhance financial cooperation around the world in unprecedented ways at scales both large and small.”
Bitcoin and the blockchain aren’t merely a form of payment. They are a gift that keeps on giving, providing us with an opportunity to decentralize the Internet again. However, scaling decentralized blockchains is a difficult task, to say the least.
Blockchains operate by global consensus across the network i.e. they need to have a variety of full nodes to validate the transactions in order to solve the double spending problem.
This means that if you want to make a payment, you need to broadcast your transaction first and wait for it to be verified by all other nodes on the network for an indefinite amount of time depending on the traffic. Furthermore, you and all other nodes on the network participate in its security, so you must indefinitely store, verify, and pass on transactions.
As a response to these drawbacks, Elizabeth Stark and her company Lightning Labs have introduced the Lightning Network – bringing us the transactions of the future by addressing the scalability issues that currently trouble Bitcoin and the blockchain:
“Lightning-fast blockchain payments without worrying about block confirmation times. Security is enforced by blockchain smart-contracts without creating an on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds.”
The Lightning network introduces a different payment network structure. Instead of trying to reach the ever-increasing number of users on-chain, you could create instant, high-volume, off-chain transactions that happen on a peer-to-peer network (thus removing the need for a trusted third party), that still utilize the underlying blockchain for security.
In order to understand Lightning more clearly, let’s look at it through an example:
You have 2 participants that want to transact: let’s call them Alice and Bob. Alice and Bob enter into a 2-of-2 multi-signature transaction (imagine this as a joint savings account of 2 people – both their signatures are required to withdraw the funds); that is the initial transaction that gets you on to the Layer 2 (the Lightning Network) and the only transaction that is visible to the blockchain.
Say both Alice and Bob put in $10 each, and they now have a $20 so-called payment channel. Every time Alice and Bob transact, they exchange their digital signatures and update the state of their local, off-chain “channel”.
But, if the blockchain is the thing that guarantees that Alice couldn’t steal Bob’s coins if she wanted to, how is Bob protected when he’s off-chain?
If at any point there is an attempt to steal a participant’s coins, he or she can simply broadcast the most recent legitimate state of the channel as a regular on-chain transaction.
We should mention that even though we use the term “off-chain”, the bitcoins never actually leave the blockchain. Rather, they are held in a multi-signature address as long as the channel is open.
When the channel is closed, the final transaction is added to the bitcoin blockchain. So, in the event of an attempted stealing, not only is Bob able to retrieve his funds, he also claims Alice’s funds as a penalty — what is known as a penalty transaction.
In Elizabeth’s words, “One of the core tenants of this [protocol] is you don’t have counterparty risk, and you don’t have to trust [the person] you’re transacting with.”
A network of channels
As we’ve established, two participants form a secure private connection for fast off-chain transacting called a payment channel. So let’s say that Alice wants to send funds to Carol, but the two of them don’t have an open channel.
However, Alice has established a payment channel with Bob, and Bob has established a payment channel with Carol.
Lightning offers a mechanism for this, too. Instead of opening a new channel with Carol, Alice can send the payment through Bob. In this scenario, Bob actually pays Carol first and is afterward given his money back from Alice.
This prevents Bob from stealing the money in transit, however, it is possible for him to charge a small fee as a reward for being a Lightning-node (i.e. full-node) that routed the funds in order to complete the transaction.
These more complex payments (called multi-hops) don’t rely on trust either, as they are cryptographically secured using hashes. Either the whole payment goes through, or it is canceled entirely.
Lightning as a contracting system
In a way, Lightning can be considered a smart-contracting system. In this architecture, the blockchain actually serves as a court that can’t be bribed, that might be necessary only for arbitration in the case of a dispute. It can’t be bribed because everything is predetermined in the smart contract.
Lightning across blockchains
Lightning doesn’t only work for Bitcoin. In fact, not only does it work for other blockchains too, but can also be implemented to work between chains. The Lightning network doesn’t have to clear on a single chain.
In short, this use case is analogous to the Alice-Bob-Carol scenario, if Bob were to be an intermediary node that is liquid in both currencies that are involved in the so-called cross-chain atomic swap.
The penalty system – a potential major drawback
As we already explained, the Lightning Network consists of bi-directional payment channels that are set up between two nodes. On this channel, both parties are able to initialize a transaction at any given time.
However, the transactions require both sides to actively participate in the updating of the smart contracts that keep the channel “alive”.
To better illustrate the issue, let’s look at it through an example. Let’s say that Alice and Bob have opened a payment channel, participating with 1 bitcoin each.
If for whatever reason Alice goes offline or fails to respond in another manner, she essentially breached the smart contract and is, as a consequence, penalized by forfeiting her claim to the funds in the channel — even the funds that are rightfully hers.
Not only does this pose a problem for Alice, as the problem might just be a technical issue and not an attempt to steal, but it is also very inconvenient for Bob. In a way, this unresponsive party is similar to a DDoS attack – tying up funds instead of bandwidth.
It presents a liability for Bob since all his funds are now tied up in the channel until the timeout period. However, if Alice doesn’t appear until the end of the timeout period to complete the smart contract, Bob can submit the latest valid transaction to the blockchain and close off the channel with that update of the balance.
So let’s say that the last successful transaction resulted with Alice getting 0.5 BTC and Bob getting 1.5 BTC, and the ongoing transaction was supposed to update the balance to 2 BTC for Alice and 0 BTC for Bob. And then, Alice went offline.
You can see how this penalty system is ultimately going to be unfair to Alice, as she will lose her funds over what might as well have been a shovel in the optic fiber in her neighborhood. The only thing that can prevent this is if Alice could somehow submit this final transaction to the network before Bob’s transaction is validated.
If Alice isn’t extremely careful, Bob will end up stealing what is rightfully hers. In other words, penalizing unresponsive parties is a mechanism intended to keep the network functional, but it can easily go south.
Even though Elizabeth has a legal background, she does a fine job of explaining complex aspects of the Lightning technology through vivid analogies. Her intellect is obvious, and her enthusiasm shines through every time she talks on the subject.
However, she isn’t a developer and, especially in the earlier interviews, some of her answers seem superficial and scripted. We can chalk this up to the fact that she’s only given so much time to present what the Lightning Network is about and has to stick to the important talking points, but a part of the crypto community seems to think otherwise. She has received some criticism on upspeaking, and a lack of a deeper understanding of the advanced technical concepts she talks about. Some “critics,” however, don’t go so far as to back up their claims, and simply accuse Stark of “riding the Bitcoin wave,” “having fanboys just because she’s a girl,” etc. We are yet to see actual proof confirming these claims, and when it comes to Stark’s qualifications to be a spokesperson, she has openly shared her role in the company. In her words, she’s “involved in the spec process, [helps] with testing and app development, updating documentation, educating the community, writing about LN, [she] helped on the original LN paper, etc.”
There seems to be a clear division in the community; part of it finds Stark to be competent for the role she’s taken upon herself, and part of it attributes her fame to something other than her skills (or finds it to be straight-up baseless). And while the Lightning Network certainly raises our hopes for a more efficient way to transact online, part of the work is presenting the technology in the best way possible. Her competence, however, shall not be measured by the likes and dislikes of irrelevant Redditrolls, but rather, by the objective success of her project. As of now, the LN is gaining traction and her credibility remains intact.
While Lightning takes excellent care of small, dynamic transactions that would otherwise be infeasible to execute on the blockchain, it doesn’t seem to be as suitable for larger payments. In light of the previously mentioned issue that comes with the penalty system, it is clear how transacting with larger amounts can lead to more than a mere inconvenience.
Vendors are the key group that can lead to large-scale Bitcoin adoption, and they simply cannot afford this kind of technical outage. If this issue isn’t addressed properly, the negative experience could turn away users from the Lightning Network, and possibly from Bitcoin altogether.
To be fair, however, hardly any technologies are versatile enough to address diametrically opposite and mutually exclusive problems, so the Lightning Network lives up to exactly what it claims to be – a faster, cheaper way to complete microtransactions using cryptocurrencies.
While widespread adoption may take some time, we can already see the technology grasping the attention of valued members of the Bitcoin community.
Bitcoin enthusiast and cryptocurrency educator Andreas Antonopoulos has given extensive insight into Lightning in a Q&A video and has also talked about it with Elizabeth Stark in an episode of Let’s Talk Bitcoin.
Earlier this year, Lightning was used to pay for a Steam game. With Elizabeth Stark as the face of the company, Lightning seems to be making its way on the crypto scene, with many recognizing its potential to bring Bitcoin transactions closer to the wider audience.
Elizabeth Stark is the heroine that the crypto world deserved — and actually needed. Her efforts to better the community cannot be understated, as she had taken upon herself to teach students how to engage with the Internet in a manner that is not only beneficial to them, but to the rest of the world as well.
Educating by day, perfecting the Lightning by night; we are yet to see the ripple effect that Stark’s hard work and brilliance will embark on the world.
Do you think Elizabeth is the right woman for the job? Share your opinion in the comment section below!