Ibex is building a settlement layer for a digitally native global economy on the foundations of the Lightning Network. International commerce on fiat rails is unavoidably slow and expensive because, at its root, it is built on credit. The global system of correspondent banking serves to link together different credit transactions. Individually these take time and are costly, hence in aggregate, and especially across relatively illiquid currency pairs, they can become not only expensive in terms of transactions fees but prohibitively capital inefficient in terms of funding requirements. Since these processes are necessarily analogue, they are ill-suited to commerce either organized online or for which the goods themselves are digital. The notion of “programmability” is inapplicable without digitally native value.

Ibex’s technology utilizing the low fee and instant settlement of the Lightning Network, a revolutionary  mechanism of pure debit in which the payment links are enforced by cryptography rather than bilateral credit lines. Relative to fiat banking, this makes payments instant, completely removes counterparty risk, and introduces an element of programmability. Even relative to stablecoins this mechanism is arguably superior given the sender and receiver need not trust the same token issuer to access the rails. We would expect further that growing adoption of stablecoins will ultimately require the Lightning Network to facilitate settlement outside the context of a single global issuer, and hence Ibex’s technology will likely be valuable to prospective issuers in the digitally native space as well as the incumbent fiat system.

We think of Ibex as akin to something like electricity generation and transmission. In the early days of its development and deployment it seems an exotic new technology. But the potential of its importance to commerce is so great that eventually it will be entirely taken for granted and, crucially, never contested. The only reason a business today would fail to pay their electricity bill is because they are bankrupt. This infrastructure exists, it is fundamental to industry and commerce as we know it, and hence its use is never questioned or reneged on. On the one hand it may be commoditised in contemporary markets, but on the other, the eventual winners of the transmission buildout were amongst the most successful compounders of capital across the twentieth century. If the reader perhaps finds this comparison unrealistic, consider the more obvious analogue of the operators of the global correspondent banking network being a handful of the world’s most valuable businesses today.

The Lightning Network represents a technological revolution in the speed, cost, and flexibility of value settlement. It is easily a 10x or even 100x improvement on the technology it is set to replace, and Ibex is leading the charge in driving its adoption.

Ibex is a holding in Axiom Venture Fund I