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digital
daily

digital daily: The Money Smart-Grid

The Money Smart-Grid: New digital infrastructure is often compared to analog predecessors. Digital money flows like electricity. Early in the industrial revolution, electricity was in short supply as individual dynamos drove their own factories or the lights of a well-off town square. Upfront capital costs limited broader distribution, restraining the productivity unlock of electricity. Overbuilding was necessary, scoped to meet peak demand. Today, we still struggle with the balancing act between capital efficiency and power capacity. This analogy forms a basis for criticism of Bitcoin's Lightning Network – that it lacks the peak capacity for serious capital to ride its rails. But digital infrastructure is not static. Lightspark recently introduced tooling that allows enterprise-grade applications direct access to the Lightning Network. Their "Predict" product highlights the advantages of digital infrastructure. Predict uses machine learning algorithms to assess real-time demand patterns and then automatically allocates capital to support transactions on that channel. The approach improves capital efficiency by more than 10x while minimizing the cost of maximum throughput. It is a just-in-time capital model that calibrates the network to the users. Transactions on Lightning charge almost no fees compared to the 1-3% toll VISA charges to backstop its centralized network. If Lightning matches VISA's capacity, it’s clearly a better solution. Predict plots a path for technology that dynamically optimizes financial rails – a sign of things to come. Digital infrastructure is dynamic. It can respond to users. Analogies to physical infrastructure are outdated.

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