What's all the hype about nostr?
And what's it got to do with Bitcoin?
Nostr (I pronounce it noster; it stands for Notes and Other Stuff Transmitted by Relays) is a relatively new and currently trending thing out there on the tech-geek corner of the interwebs. The short version is that it’s:
possibly important for Bitcoin,
possibly going to be the “next big thing”,
and still very, very early. Think Bitcoin circa 2010 early, but more chaotic.
What is it?
Nostr itself, at the core, is nothing but a way to store and send small messages over the internet. It’s email for the 21st century. The innovation is to provide a simple, free, and open source specification for exactly how to store and send all different kinds of small messages. Small messages can be bits of human-readable text (think Twitter), but they might also be things like usernames, links, private messages, and so on. The idea is that by using a single, standardized, open source specification for storing and sending different kinds of messages, services can mix and match how they present information to users across different web and mobile applications. Users who participate in the system through any one point of entry can carry all of their activity and data with them through to any other service that uses the same open protocol. Importantly, one type of “small message” that is being integrated as a first-class citizen right from the start is Bitcoin. Bitcoin addresses and Lightning invoices are just small messages, after all. In this way, the nostr ecosystem comes fully equipped to take advantage of the internet’s native money.
What does all of this mean for a typical user? Today, you might sign up for Twitter, Facebook, Instagram, Amazon, Google, and a thousand other services. Each service needs to know your basic information. There are varying degrees of privacy across this multitude of services, but many people are accustomed to giving out their email address, phone number, name, and even address and credit card information. Each platform is a silo. Data goes in, but it’s not always easy to get out, and it’s definitely not easy to move data between silos, let alone maintaining any semblance of control over your own data while jumping through all the hoops. With nostr, this whole mess is being re-imagined.
The self-sovereign “nostrich” (I know…) of the future will generate a nostr private key much like they generate a Bitcoin private key today. Bitcoin pubkeys are usually called addresses, and we associate them with Bitcoin ownership. Whoever owns the private key for an address owns the Bitcoin, hence: not your keys, not your coins. With nostr, your pubkeys can best be thought of as identities. Each pubkey is a separate, pseudonymous identity, and they are only connected to the extent that you decide to connect them. Instead of “signing up” for a service with your email or phone number, you simply go straight to “logging in”. Identity ownership follows the keys, just like address ownership follows the keys in Bitcoin. For nostr: not your keys, not your identity. Through an app or a browser extension, you tell a particular service which pubkey you want to use, and all of your data on that service is linked to that pubkey. If you want, you can use the same pubkey on different services, in which case your data would simply follow you, at least in theory. You can also of course use different pubkeys on the same service to manage multiple identities. Each service operates a “nostr relay” (just a web server) that stores the data in a uniform way—that makes it portable—but services can do anything they want on the presentation layer. That means there are infinitely many ways to design and interact with many, many different types of “small messages”. The possibilities are endless, and existing nostr services have not even begun to scratch the surface.
You’ve probably heard the saying: “if you’re not paying for the product, you are the product”. We have become far too accustomed to the fact that all of our favorite online services function on the principle of continually selling us out. We provide content for free, and businesses snoop on our content to feed algorithms that push advertising in our faces around the clock. Some content creators do very well, but most receive little to nothing for their work. Of course, there are different “tip” services on sites like Twitter and Reddit and Substack, but these are full of friction and require credit cards and significant amounts of money. Many Substacks are $5 per month. Who can spend $60 a month just to read a dozen decent publications? On the creator side, how much time and energy will it take to get enough dedicated paid subscribers to make financial sense?
There are plenty of people who would like to pay creators a little something—a token of appreciation—but friction and relatively high fixed costs often make that a non-starter. There are plenty of creators who would like to do more, but are perhaps not inclined to run a full-on social media business. On top of that, those creators who do put in the time and energy to make a living often find themselves subject to one-sided contracts and self-censorship, lest they risk being deplatformed or losing advertisers. The current state of affairs is a lose-lose for just about everyone but the tech monopolies.
The value-for-value proposition is fundamentally different and flips everything on its head. What if the Twitter like button was actually a “tip” button, where you could pay $0.01 directly to the author with no middleman? A hundred likes, and the author gets $1. Ten thousand likes? A hundred bucks. Maybe somebody found the Tweet particularly good: $10. What if that worked for any Tweet, from any author, seamlessly and without any friction? With Bitcoin and Lightning built in to the ecosystem, this is not only possible, it’s already a reality. But it goes far, far beyond tipping for Tweets. Content creators and artists in all fields lose huge amounts of money to intermediaries. Think about how much record labels take from musicians. What if live online concerts had a “pay what you like” or “stream payment while listening” feature built into the app where proceeds went directly into the band’s own Bitcoin wallet? What if that worked for TV shows and movies? What if it worked in the “real world” at places like restaurants or in a taxi?
Frankly, I don’t like tipping. I’ve lived in countries where it is not the norm, and I much prefer it that way. However, I think my distaste for it comes from the social expectations around tipping when it is actually quasi-mandatory and constitutes a significant portion of the total cost beyond the up-front pricing. Value-for-value is the idea that everything can be tippable, and that tips can be given in real time, but that you should only tip as much as you actually value the product or service. If you consume some content and didn’t like it, don’t tip. If another piece of content inspired you and brightened your day, leave a nice tip—but within your own budget, of course. By making it possible to tip anything and everything, without friction, at any amount (even down to tiny fractions of a penny), and by using an open protocol where users and creators interact on their own terms, value-for-value makes it possible for high-quality services and content to succeed without big businesses spying on users and intermediaries siphoning money from all sides.
Bitcoin is a peer-to-peer electronic cash system. Value-for-value is the paradigm that enables us to use Bitcoin as it was meant to be. Nostr is a set of technologies that allows people to participate without friction in the value-for-value ecosystem, on their own terms, to the extent that they choose, and with full control over their own digital identities. If Bitcoin is the escape hatch from the legacy monetary monopoly, then value-for-value and nostr are the escape hatch from the legacy tech monopoly.
So all of that sounds great, at least to me. But nostr is new. If we are early in Bitcoin, we are really early in nostr and the associated worldwide value-for-value ecosystem. The nostr protocol and a wide array of nostr-compatible software are under heavy development at the moment. There are big changes and improvements regularly, but there are also a huge number of outstanding tasks for developers, designers, and entrepreneurs to solve before nostr will be competitive with legacy tech. I suspect the majority of problems haven’t even been thought of yet. Despite how rapidly the space is moving right now, it will take time (years) to work out enough kinks that the ecosystem becomes user-friendly for an average non-technical person.
For starters, what does it mean to link an identity to a cryptographic key? PGP proponents have been trying to mainstream this idea for decades, with little success. Cryptographic keys are hard to manage. People lose private keys, or they become compromised. Cryptography does not have a “password reset” button. The idea of losing one’s life savings due to a misplaced or forgotten Bitcoin key is probably the biggest barrier to self-custody today. With nostr, the problem is compounded in different ways. The existing legacy systems are years ahead of the nostr user experience, and do not require managing keys. Compared to the legacy tech, nostr is and will remain more complicated due to the nature of public-key cryptography. Some wise Bitcoiners choose to put in the effort it takes to learn about safe key management, but that’s because there is real money on the line. Nostr is asking people to take on the same level of responsibility, but without the obvious financial incentive, and despite there being a widely used, familiar alternative that is much easier. It does not seem obvious to me that people are ready to go down that path just yet.
Monetization is another huge problem. We are accustomed to services being free. WhatsApp used to cost $1 per year, but even that was too much and eventually scrapped. We all like to think we skip over the ads, but clever businesses integrate ads so thoroughly now that many people actually can’t tell the difference. In any case, enough people click them that the global online advertising market is on its way to a trillion dollars in the next few years. That trillion dollars pays for all of our favorite services, and it will be really tough to compete against those services for free. If WhatsApp’s history is anything to go by, maybe even frictionless micropayments will be too much. If the best nostr services find that they need to go with the ad revenue model, we might simply find that value-for-value isn’t enough on its own. And if we’re getting bombarded with ads anyway, might as well just stick with Twitter and Facebook, no? The people running nostr relays today are doing it for free, for fun. That’s great when there are ten thousand users. It’s not so great when there are fifty million, or a billion. Our gracious nostr hosts will only be able to foot thousand-dollar monthly bills for so long before they need to find a working revenue model. The space is wide open for entrepreneurs to come try their ideas as the ecosystem grows, but I think it’s far, far too premature to say how that will work, or even if it will work. I hope it does, but I wouldn’t place any big bets on it just yet.
Anyway, nostr and value-for-value are already here today, but they’re niche, and I expect that to be the case at least for a while. For my part, I plan to continue participating in this new ecosystem. I’m looking forward to see how it evolves. If you’re intrigued, check out all of the different services and clients listed on nostr.net and start experimenting. You don’t need to provide any personal information at all, and it doesn’t cost anything, at least not yet. Maybe the hype is good just to get people interested, but as they say: bear markets are for building. I think we probably won’t see any radical improvement in this new space until the hype dies down for a while and the builders have had some time to do what they do best.