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The dream of using bitcoin as p2p digital cash does seem to be dead for now, the fees are too high for that[1]. Lightning hasn't really taken off for that use c

The dream of using bitcoin as p2p digital cash does seem to be dead for now, the fees are too high for that[1]. Lightning hasn't really taken off for that use case either, the number of bitcoins in Lightning channels appears to have stopped growing.[2] But it looks like bitcoin can still be very useful as an alternative settlement layer for international payments. Either directly for large payments, or under the hood for something like Strike[3]. [1] https://ycharts.com/indicators/bitcoin_average_transaction_fee https://ycharts.com/indicators/bitcoin_average_transaction_f... [2] https://bitcoinvisuals.com/ln-capacity https://bitcoinvisuals.com/ln-capacity [3] https://jimmymow.medium.com/announcing-strike-global-2392b908f611 https://jimmymow.medium.com/announcing-strike-global-2392b90...

skohan 6y ago
As someone who lives my life in two currencies, my main hope for Bitcoin circa 2014 was that it would make for simpler and cheaper international transactions and currency conversions. I don't know if the situation has gotten any better, but around 2015/2016 this seemed untenable due to high transaction costs, and volatility. I'm not sure I understand what would be the value of using cryptocurrency under the hood for something like Strike. If they are settling the payments themselves, why not just use a simple database to reconcile their transactions?
- wcoenen 6y ago
  > I'm not sure I understand what would be the value of using cryptocurrency under the hood for something like Strike. If they are settling the payments themselves, why not just use a simple database to reconcile their transactions? A multi-country payment service can indeed just update their database. But If there is a net flow of value between countries, then they will still have to move that value over slower and more expensive traditional systems. If they implement fast transfers for their users on top of those slow systems, then that means they need idle capital waiting in each destination country so that they can front the money to the receiver. This adds cost and complexity: interface with traditional systems, capital opportunity cost, need to forecast demand, need to do currency hedging, ... Transfering via bitcoin and converting via exchanges on both ends eliminates that problem. It also makes it easy to partner with other payment services that do the same, while minimizing the need for trust.
vbezhenar 6y ago
USD equivalent in lightning is growing. I think that it matters more. People usually use USD prices and then derive bitcoin price for goods and other stuff.
- imtringued 6y ago
  Isn't this just caused by the recent price spike? Bitcoin started off at $10k. It's at $30k now. You have to, ahem, adjust for deflation.
nullc 6y ago
> the number of bitcoins in Lightning channels appears to have stopped growing That is misleading in two respects: Funds in lightning have high velocity, so it doesn't necessarily take a lot of funds to support a lot of economic activity. Channels were originally all public, but now most channels are private, so no one really knows how much funds are involved in lightning channels. People who use lightning generally describe it very positively. The bigger impediment to making small frequent payments is Bitcoin's tax treatment: E.g. in the US every single purchase made with Bitcoin requires line item reporting to the IRS and cost basis tracking.

skohan 6y ago

As someone who lives my life in two currencies, my main hope for Bitcoin circa 2014 was that it would make for simpler and cheaper international transactions and currency conversions. I don't know if the situation has gotten any better, but around 2015/2016 this seemed untenable due to high transaction costs, and volatility. I'm not sure I understand what would be the value of using cryptocurrency under the hood for something like Strike. If they are settling the payments themselves, why not just use a simple database to reconcile their transactions?

wcoenen 6y ago
> I'm not sure I understand what would be the value of using cryptocurrency under the hood for something like Strike. If they are settling the payments themselves, why not just use a simple database to reconcile their transactions? A multi-country payment service can indeed just update their database. But If there is a net flow of value between countries, then they will still have to move that value over slower and more expensive traditional systems. If they implement fast transfers for their users on top of those slow systems, then that means they need idle capital waiting in each destination country so that they can front the money to the receiver. This adds cost and complexity: interface with traditional systems, capital opportunity cost, need to forecast demand, need to do currency hedging, ... Transfering via bitcoin and converting via exchanges on both ends eliminates that problem. It also makes it easy to partner with other payment services that do the same, while minimizing the need for trust.

vbezhenar 6y ago

USD equivalent in lightning is growing. I think that it matters more. People usually use USD prices and then derive bitcoin price for goods and other stuff.

imtringued 6y ago
Isn't this just caused by the recent price spike? Bitcoin started off at $10k. It's at $30k now. You have to, ahem, adjust for deflation.

nullc 6y ago

> the number of bitcoins in Lightning channels appears to have stopped growing That is misleading in two respects: Funds in lightning have high velocity, so it doesn't necessarily take a lot of funds to support a lot of economic activity. Channels were originally all public, but now most channels are private, so no one really knows how much funds are involved in lightning channels. People who use lightning generally describe it very positively. The bigger impediment to making small frequent payments is Bitcoin's tax treatment: E.g. in the US every single purchase made with Bitcoin requires line item reporting to the IRS and cost basis tracking.