Elizabeth Stark: Why Bitcoin Needs a Lawyer

Bitcoin is a movement, and everyone here is participating in building an entirely new financial system.

Written by: Thejaswini M A

Translated by: Block unicorn

Preface

On a Tuesday in March 2023, a trademark lawsuit struck.

Elizabeth Stark watched as her company’s biggest product launch plan fell apart. Lightning Labs had spent years building the “Taro” protocol, which allowed people to send stablecoins over the Bitcoin Lightning Network. The technology was ready, the community was enthusiastic, and major partners were prepared.

Then, a judge issued a temporary injunction. Tari Labs claimed they owned the “Taro” trademark. Lightning Labs had to immediately stop using the name. No more development announcements or marketing could be released.

It took weeks to rebrand as “Taproot Assets.” Months of momentum vanished overnight; partners had to explain the name change to confused customers. Some questioned whether Lightning Labs had done enough trademark research before launching such a major initiative.

But Stark pressed on. The technology continued to develop under the new name, even though competitors gained an advantage during the forced pause.

She built one of the most important infrastructure companies in Bitcoin. Stark’s work aims to reshape how Bitcoin operates, but whether her vision can truly be realized globally remains to be seen.

Before Elizabeth Stark built Bitcoin infrastructure, she learned how to fight opponents far more powerful than trademark holders.

Resisting Bad Regulation

Harvard Law School, 2011. Stark organized a grassroots movement to stop two bipartisan bills from passing in Congress.

The “SOPA” and “PIPA” bills would have allowed copyright holders to force suspected infringing websites offline.

What were they?

“SOPA” (Stop Online Piracy Act) and “PIPA” (Protect IP Act) were proposed US laws aimed at combating online piracy by allowing copyright holders to force suspected infringing websites offline. These bills would have allowed blocking websites from accessing advertising, payment processing, and search engine services. This could have shut down websites even outside US jurisdiction. Many feared these laws would lead to widespread internet censorship, harming legitimate websites and free speech.

Social media platforms, search engines, and user-generated content sites would face constant legal threats. Most tech companies didn’t dare oppose the legislation directly, fearing backlash from lawmakers.

Stark co-founded the Harvard Free Culture Group and helped coordinate campus protests. Her message was that these bills would make platforms liable for user content they couldn’t monitor, destroying the internet.

“This isn’t a fight between Google and Hollywood,” she explained, “it’s a fight between 15 million internet users and Hollywood.”

Wikipedia went dark for 24 hours. Reddit shut down. Protesters flooded Congress’s phone lines. Within days, lawmakers abandoned the bills. SOPA and PIPA died in committee.

This movement taught Stark that sometimes you can’t beat institutions through traditional channels, but you can make their preferred solutions politically impossible.

During law school, she also founded the Open Video Alliance and organized the first Open Video Conference. The inaugural event attracted 9,000 participants, proving the demand for alternatives to traditional media “gatekeepers.” But organizing conferences and fighting bad legislation seemed too passive. After graduation, Stark held academic positions at Stanford and Yale, teaching how the internet reshapes society and the economy. She researched digital rights and worked with policy organizations to develop better frameworks around emerging technologies.

Policy solutions always lag behind technological change. By the time lawmakers understand new technology well enough to regulate it, the technology has already evolved into something else.

What if you could build technology resistant to bad regulation from the start?

The Bitcoin Battle

In 2015, the Bitcoin community was fighting for its future.

The “block size war” had raged for months. Bitcoin could only process about seven transactions per second, far too few to compete with traditional payment networks. One camp wanted to increase the block size to allow more transactions. The other wanted to keep blocks small to preserve decentralization.

This debate was existential. Would Bitcoin remain decentralized, or be controlled by mining companies and corporate interests?

Elizabeth Stark watched the struggle with interest. She had seen similar battles in internet governance, where technical decisions were often political. But Bitcoin was different. There was no central authority to impose a solution. The community had to reach consensus through code and economic incentives.

As the debate intensified, developers proposed a different approach: build a second-layer network on top of Bitcoin that could process millions of transactions per second while maintaining the security of the base layer.

This was the Lightning Network.

Users didn’t need to record every transaction on the Bitcoin blockchain; instead, they could open payment channels and settle multiple transactions off-chain. Only opening and closing channels required blockchain transactions.

These channels could connect to each other. If Alice had a channel with Bob, and Bob had a channel with Carol, Alice could pay Carol through Bob. The network would form an interconnected system of payment channels, enabling instant, low-fee transactions.

Stark saw the potential—and the challenges. The Lightning Network was still theoretical. The technology required complex cryptographic protocols and hadn’t been tested at scale. Most Bitcoin users didn’t understand why a second-layer solution was needed.

In 2016, she co-founded Lightning Labs with programmer Olaoluwa Osuntokun. The timing was risky, but Stark’s activist experience taught her that the best time to build alternatives is before everyone realizes they need them.

Building Infrastructure

Lightning Labs released the first Lightning Network beta in 2018. The software was far from perfect; channels often failed, liquidity management was confusing, and most wallets couldn’t integrate the technology properly.

But it worked. Users could open channels, make instant payments, and close channels without waiting for blockchain confirmations. Early adopters were mostly developers who understood the technology’s potential.

Stark wanted to serve billions of people without reliable financial services. Her team focused on real problems faced by real users.

How to manage channel liquidity to avoid payment failures? Lightning Loop allowed users to move funds between channels and the blockchain without closing channels, solving some liquidity issues, but not all.

How to create a liquidity market? Lightning Pool established a market for buying and selling channel capacity, though adoption remained limited to advanced users.

How to run the Lightning Network on mobile devices without draining battery life? Neutrino enabled privacy-preserving light clients, but the technology was still too complex for mainstream use.

Each product targeted a specific infrastructure problem. Progress was slow; the Lightning Network remained difficult for non-technical users. Channel management required constant attention. Payments often failed because the routing couldn’t find a path with enough liquidity.

But the foundation was strengthening. Mainstream wallets began integrating the Lightning Network. Payment processors started offering Lightning services. The network grew from dozens of nodes to thousands, though most capacity was concentrated in a few large nodes.

Critics pointed out that the Lightning Network’s hub-and-spoke topology wasn’t as decentralized as advertised. They questioned whether the technology could scale without being controlled by major payment processors. Stark acknowledged these concerns but argued that the Lightning Network was still in its early stages; as the technology matured, better solutions would emerge.

The Stablecoin Bet

By 2022, stablecoin trading volumes had surged. Tether and USDC saw annual trading volumes exceeding 1 trillion dollars, surpassing many traditional payment networks. But most stablecoins ran on Ethereum and other blockchains less secure than Bitcoin.

Stark saw an opportunity. Lightning Labs raised 70 million dollars to develop what became Taproot Assets, a protocol for issuing and transferring stablecoins on Bitcoin. The technology leveraged Bitcoin’s Taproot upgrade to embed asset data in regular transactions, making stablecoin transfers look like ordinary Bitcoin payments.

These assets could move over the Lightning Network. Users could instantly send dollars, euros, or other assets, benefiting from Bitcoin’s security. Every stablecoin transaction would be routed through Bitcoin liquidity, potentially increasing demand for Bitcoin and generating fees for node operators.

“We want to Bitcoinize the dollar,” Stark explained, though whether people actually want their dollars Bitcoinized remains unclear.

Why? While the technology supports dollar-denominated stablecoins on Bitcoin, the broad user base for stablecoins remains on Ethereum and other more mature ecosystems, which have deeper infrastructure, liquidity, and developer activity. This makes Bitcoin stablecoins still a niche market.

Bitcoin minimalists sometimes question adding non-Bitcoin assets to Bitcoin, reflecting ideological hesitation or a preference to keep Bitcoin as pure “digital gold” rather than a multi-asset settlement layer.

Users in emerging and inflationary markets need stablecoins for stability, but adoption on the Bitcoin Lightning Network must overcome barriers of complexity, liquidity, and user experience compared to mature stablecoin rails. The market is still determining the product-market fit for stablecoins on Lightning, so the demand for large-scale “Bitcoinization of the dollar” is aspirational but not yet established.

However, the trademark dispute forced “Taro” to be renamed Taproot Assets, but development continued. By 2024, Lightning Labs had launched Taproot Assets and begun processing real stablecoin transactions. Bridging services moved USDT from Ethereum to the Bitcoin Lightning Network; users could send dollars for just a few cents.

But adoption remains limited. Most stablecoin users remain on the more developed Ethereum ecosystem. Bitcoin minimalists question whether introducing other assets to Bitcoin is necessary or desirable. The technology works, but product-market fit remains elusive.

The Network Effect Problem

Today, Lightning Labs operates critical Bitcoin infrastructure by developing and maintaining LND (Lightning Network Daemon). LND is the main software implementation of the Lightning Network, supporting most of Bitcoin’s second-layer payment channels. But Elizabeth Stark’s grand vision remains unproven. She envisions building a “monetary internet” where financial services can operate globally without government or corporate permission.

Theoretically, the comparison to internet protocols is apt. Just as anyone can build websites and applications on internet protocols, anyone can build financial services on the Lightning protocol. The network would be open, interoperable, and censorship-resistant.

But a network is only valuable if people use it. The Lightning Network is adopted fastest in countries with unstable currencies or unreliable banking systems, but even there, user numbers are in the thousands, not millions. Remittance companies have tried using the Lightning Network, but most business still relies on traditional channels.

Stark’s team is working to integrate AI for autonomous payments, privacy improvements, and developer education resources. Each advancement is technically impressive, but mainstream adoption always seems just out of reach.

“Bitcoin is a movement,” Stark says. “Everyone here is participating in building an entirely new financial system.”

The movement is real, but its impact on ordinary people remains limited. In theory, the Lightning Network can process thousands of transactions per second; in practice, most people still use credit cards and bank transfers. Whether Bitcoin payments can become as natural as sending an email depends on solving persistent user experience issues.

But the Lightning Network is still far from Stark’s vision of being “as simple as sending an email.” Managing channel liquidity is like running your own bank operations department—you need to constantly monitor whether both ends of your payment channels have enough funds, or transactions will fail. When there’s insufficient liquidity along the routing path, payments can break down more often than you’d expect. Setting up the Lightning Network still requires reading documentation and understanding concepts like “inbound capacity.” Most people just want to click a button to transfer money, not become amateur liquidity managers.

Lightning Labs has spent 70 million dollars developing Taproot Assets, improving node software, and trying to convince developers to build Lightning applications. Taproot Assets aims to let stablecoins and other tokens flow through Lightning channels, which could make sense if people really want to send stablecoins over Bitcoin infrastructure rather than using existing stablecoin networks. They’re also working to make LND software easier to use and trying to educate developers on why they should care about the Lightning Network. Whether these efforts will get ordinary people to actually use the Lightning Network for everyday payments remains unknown.

The technology works, but “working” and “good enough for ordinary people” are two different things.