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LN requires opening and closing channels, each of which have to be done as a regular Bitcoin transaction. The value proposition of LN is that repeated transacti

LN requires opening and closing channels, each of which have to be done as a regular Bitcoin transaction. The value proposition of LN is that repeated transactions with the same entity (or some subset of) can be done without high fees, but considering almost nobody is currently using LN that doesn't change things right now.

rawtxapp 5y ago
Channel factories will bundle channel open/closes into a single transaction significantly reducing the burden on the blockchain. LN adoption is growing very nicely (1ml.com), there are lots of wallets and users now.
- paulgb 5y ago
  Is it possible to calculate the transaction volume in BTC over the lightning network, or is the ledger non-public in the same way that Bitcoin's is? If I understood the Satoshi paper right, after the block reward is exhausted the network's security depends on transaction fees being high enough to sustain a strong level of security. If Lightning brings transaction fees down, is that not a threat to the security of the network as the block reward becomes smaller?
  - rawtxapp 5y ago
    If you run a node on lightning, you would know how much transactions you've forwarded, so you can make estimates, especially if you run a large node (say Bitfinex that runs their own nodes), but lightning isn't public the same way blockchain is. The 1MB block limit makes it highly likely that there will be transactions in the mempool, you still need to open/close channels (even batched ones) and presumably large transfers for cold storage still happen on the blockchain, but then again it's very difficult to say what happens in year ~2140, we'll all be long gone by then.
    - throwaaskjdfh 5y ago
      > [I]t's very difficult to say what happens in year ~2140, we'll all be long gone by then I think it's more likely that at least one young person reading this news today will live to ~130 than Bitcoin making it that long.
      - rawtxapp 5y ago
        At those time scales, it's pretty difficult to predict anything imo. That said, Bitcoin has been declared many times before and it'll continue to be predicted, it always comes back stronger. 1: https://www.bitcoinisdead.org/ https://www.bitcoinisdead.org/
    - WanderPanda 5y ago
      It is also only 2140 if you believe that the market cap can double with the halvening schedule every four years. I see the upper bound (around gold market cap) in 3-5 halving cycles. After that the majority of the security has to be financed by tx fees
      - rawtxapp 5y ago
        I'm referring to block rewards, the miners will get block rewards until 2140, price of Bitcoin doesn't matter.
        paulgb 5y ago
        Miners will get an exponentially decreasing amount of block rewards until 2140, but even 20 years from now the (BTC-denominated) size of the block rewards will be substantially lower than they are today. The price matters because they are BTC-denominated. If the price of Bitcoin doubles every 4 years, the security of the system can stay at parity with what it is today (assuming the real value of transaction fees stays roughly the same).
        madacol 5y ago
  - ddtaylor 5y ago
    LN doesn't reduce on-chain Bitcoin transaction fees, but instead attempts to move most of the transactions off-chain. With LN you would open a channel using an on-chain transaction, conduct any number of off-chain transactions in that channel, then "settle" the channel by closing with another on-chain transaction. There basically are two different views currently on the future scalability and funding model of the network. The LN/small block view is to keep that layer limited and small and build on top of it and the idea is that with such limited transaction volume these "settlement" transactions will eventually cost a lot. I don't really see this working since to compete with block subsidy rewards you would need very costly transactions. The big block or "Bitcoin Cash" view is to scale the block size up and eventually you will have very high volume of on-chain transactions.
    - somebodythere 5y ago
      Why do you need to compete with block subsidy rewards? Block subsidies are in addition to transaction fees
    - anonporridge 5y ago
      > I don't really see this working since to compete with block subsidy rewards you would need very costly transactions. This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered. There's no required amount of energy used for mining and miners are offered 0 guarantee of reward. Mining difficulty automatically increases and decreases depending on how profitably miners can operate. If the reward drops to the point that a miner using expensive coal can't compete with a miner using cheap solar, then they simply go out of business and hope they can sell their equipment to someone who can still turn a profit.
      - ddtaylor 5y ago
        > This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered. Miners don't dictate the reward they get. The subsidy is the "block reward" that started at 50 BTC and halves every 4 years, which is currently at 6.25 BTC - it will be halved again in a few years to 3.125, etc. Blocks are as full as they can be right now and rarely get to the 1.0 BTC mark, so basically if you want the transaction fee market to pay for blocks without increasing the size you'll need to pay close to 6X to 10X higher fees than the current price. > There's no required amount of energy used for mining This is true and actually the difficulty can decrease, but none of that changes how many transactions can actually fit into a block. > Mining difficulty automatically increases and decreases depending on how profitably miners can operate. Mostly accurate. Mining difficulty decreases if a block took too long to mine. There are lots of scenarios where mining difficulty could get easier - most of which don't seem plausible right now though.
- ChainOfFools 5y ago
  this is centralization with extra steps.
  - rawtxapp 5y ago
    How so?
    - ChainOfFools 5y ago
      the rise and consolidation of settlement channel aggregators is going to lead to another visa / Mastercard style duopoly, "but with blockchain."
      - minsc__and__boo 5y ago
        Yep, it's like lightning is moving closer and closer to credit cards, which was what blockchain was supposed to substitute.
      - rawtxapp 5y ago
        That doesn't make any sense, the channels are p2p, you can open and close channels with whoever you wish and your channel counterparties don't actually hold your funds, you hold them.
        ChainOfFools 5y ago
        now you're making it sound like there's no need for channel aggregation at all. which is it?
        rawtxapp 5y ago
        I think we misunderstand each other, I'm talking about batching channel open/closes, I'm not talking about with whom you open channels.
jvanderbot 5y ago
That sounds fairly easy on a national exchange level, actually.
- dragonwriter 5y ago
  Unless the national exchange is hosting wallets it controls on behalf of individual citizens, or acting as an intermediary for all transactions—in which case you’ve negated all the features of Bitcoin and may as well be using any random currency with the government as shared banker—I don’t see how it does. I mean, sure, “the government will be your bank for free” solves the problem of the unbanked, but renders the identity and features of the underlying currency mostly irrelevant.
  - chitowneats 5y ago
    Exactly. With this model, poof, there goes all your supposed benefits of "digital gold".
  - reedjosh 5y ago
    Except the main benefit of BTC is really the lack of printability. Governments can't just make more of it even if they run the LN for their country. That said I don't think it will come to full LN centralization either. There are still other cryptos that have further benefits as well. Monero for example is fully private and can do ~1500tps on chain atm. Bitcoin adoption is just one avenue to competing currencies that bring freedom back. If the LN can remain distributed and bring anonymity to its users, then great, but if not there's still further alternatives, and with decentralized exchanges, governments won't be able to stop the use of a better system. Currency competition is just plain great for human rights and freedom.
  - svachalek 5y ago
    Just like paying "Mastercard dollars" at the store means it might as well be pesos? Presumably for transactions that are worth paying blockchain fees, you'd use the blockchain.
    - 5y ago
SavantIdiot 5y ago
So "off chain" means LN holds the BTC in some other data structure then batches it up as one big transaction? Kinda like how a broker covers small retail trades until they hit enough volume to register an NYSE trade on the floor? Is that how it works? If so , this means lots of BTC is tied up in LN ... that seems dubious as heck.
- admax88q 5y ago
  Sort of. It's not entirely off chain. It's hedged in that a transaction is created sending X BTC between us, we repeatedly update that transaction off chain every time we move small amounts of money between eachother, then after Y days we submit the final transaction to the blockchain to resolve the total amounts. The idea being if one of us starts to be uncooperative, the other can just submit the transaction at its latest state so that we don't lose anything except that last update that we disagreed upon.
  - cbm-vic-20 5y ago
    Most of the examples of Lightning that I've seen involve frequent transactions between small numbers of parties. How would this work in a retail transaction? For example, if I want to buy a cup of coffee from a shop that I visit infrequently?
    - nicpottier 5y ago
      My understanding is basically there's routing and there will be centralization of channels to some extent. One way to think of LN is that it is a wallet/debit card of sorts. You transfer some amount of BTC to a Lightning channel and that becomes your wallet. You can transact with that wallet quickly/cheaply but there's always the ability for that channel to be closed and put back on the chain with the last balance in the case of disputes etc.. But as you said, coffee shop needs some path to you to make that feasible. So then you get BTCVisa (c) or whatever, which is a channel provider that has built a network of channels open with lots of vendors. If you open a channel with them then you get to benefit from getting to use the wallet you already have. There is cross-channel routing of course so maybe that doesn't happen but it seems like a natural result. LN is neat in concept, but I'm not sure I really see the point compared to Bitcoin cash or the like that just say scale on chain. I guess we'll see.
thescriptkiddie 5y ago
LN now has routing, so you can open a single channel with a well-connected node and transact with everyone. They will charge you a fee for this, but it is on the order of 1/100th as much as a regular bitcoin transaction.
- bruce343434 5y ago
  Still all sounds really complicated, obtuse and unnecessary. They should've went with a cryptocurrency which is actually usable out of the box as a... currency.
  - rawtxapp 5y ago
    And that crypto would be?
    - bigphishy 5y ago
      nano to name one
      - rawtxapp 5y ago
        Why? Are you saying that countries should start adopting a crypto with a market cap of barely 1B$, that's been around for a less amount of time, that's significantly less battle tested and that never recovered to it's all time high value? Do you think that the only thing that matters for crypto is speed and fees? You don't think trust/security/decentralization have any value? Bitcoin chooses trust and security above everything else, as it should. Then you can have layers on top where you transact at the speed of network packets.
        bigphishy 5y ago
        Monero or ethereum, both superior to bitcoin in every way.
      - anonporridge 5y ago
djschnei 5y ago
If you believe LN is only useful between two parties that share a channel, I suggest you do more reading.
minsc__and__boo 5y ago
Precisely. Lightning scales with the number of transactions, but does not scale with the number of users. For that it still needs the bitcoin network to verify, and you're back at your transaction bottleneck but with added complexity.

rawtxapp 5y ago

Channel factories will bundle channel open/closes into a single transaction significantly reducing the burden on the blockchain. LN adoption is growing very nicely (1ml.com), there are lots of wallets and users now.

paulgb 5y ago
Is it possible to calculate the transaction volume in BTC over the lightning network, or is the ledger non-public in the same way that Bitcoin's is? If I understood the Satoshi paper right, after the block reward is exhausted the network's security depends on transaction fees being high enough to sustain a strong level of security. If Lightning brings transaction fees down, is that not a threat to the security of the network as the block reward becomes smaller?
- rawtxapp 5y ago
  If you run a node on lightning, you would know how much transactions you've forwarded, so you can make estimates, especially if you run a large node (say Bitfinex that runs their own nodes), but lightning isn't public the same way blockchain is. The 1MB block limit makes it highly likely that there will be transactions in the mempool, you still need to open/close channels (even batched ones) and presumably large transfers for cold storage still happen on the blockchain, but then again it's very difficult to say what happens in year ~2140, we'll all be long gone by then.
  - throwaaskjdfh 5y ago
    > [I]t's very difficult to say what happens in year ~2140, we'll all be long gone by then I think it's more likely that at least one young person reading this news today will live to ~130 than Bitcoin making it that long.
    - rawtxapp 5y ago
      At those time scales, it's pretty difficult to predict anything imo. That said, Bitcoin has been declared many times before and it'll continue to be predicted, it always comes back stronger. 1: https://www.bitcoinisdead.org/ https://www.bitcoinisdead.org/
  - WanderPanda 5y ago
    It is also only 2140 if you believe that the market cap can double with the halvening schedule every four years. I see the upper bound (around gold market cap) in 3-5 halving cycles. After that the majority of the security has to be financed by tx fees
    - rawtxapp 5y ago
      I'm referring to block rewards, the miners will get block rewards until 2140, price of Bitcoin doesn't matter.
      - paulgb 5y ago
        Miners will get an exponentially decreasing amount of block rewards until 2140, but even 20 years from now the (BTC-denominated) size of the block rewards will be substantially lower than they are today. The price matters because they are BTC-denominated. If the price of Bitcoin doubles every 4 years, the security of the system can stay at parity with what it is today (assuming the real value of transaction fees stays roughly the same).
        madacol 5y ago
- ddtaylor 5y ago
  LN doesn't reduce on-chain Bitcoin transaction fees, but instead attempts to move most of the transactions off-chain. With LN you would open a channel using an on-chain transaction, conduct any number of off-chain transactions in that channel, then "settle" the channel by closing with another on-chain transaction. There basically are two different views currently on the future scalability and funding model of the network. The LN/small block view is to keep that layer limited and small and build on top of it and the idea is that with such limited transaction volume these "settlement" transactions will eventually cost a lot. I don't really see this working since to compete with block subsidy rewards you would need very costly transactions. The big block or "Bitcoin Cash" view is to scale the block size up and eventually you will have very high volume of on-chain transactions.
  - somebodythere 5y ago
    Why do you need to compete with block subsidy rewards? Block subsidies are in addition to transaction fees
  - anonporridge 5y ago
    > I don't really see this working since to compete with block subsidy rewards you would need very costly transactions. This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered. There's no required amount of energy used for mining and miners are offered 0 guarantee of reward. Mining difficulty automatically increases and decreases depending on how profitably miners can operate. If the reward drops to the point that a miner using expensive coal can't compete with a miner using cheap solar, then they simply go out of business and hope they can sell their equipment to someone who can still turn a profit.
    - ddtaylor 5y ago
      > This seems to suggest that miners dictate the reward they get, rather than miners are forced to adapt to the reward they are offered. Miners don't dictate the reward they get. The subsidy is the "block reward" that started at 50 BTC and halves every 4 years, which is currently at 6.25 BTC - it will be halved again in a few years to 3.125, etc. Blocks are as full as they can be right now and rarely get to the 1.0 BTC mark, so basically if you want the transaction fee market to pay for blocks without increasing the size you'll need to pay close to 6X to 10X higher fees than the current price. > There's no required amount of energy used for mining This is true and actually the difficulty can decrease, but none of that changes how many transactions can actually fit into a block. > Mining difficulty automatically increases and decreases depending on how profitably miners can operate. Mostly accurate. Mining difficulty decreases if a block took too long to mine. There are lots of scenarios where mining difficulty could get easier - most of which don't seem plausible right now though.
ChainOfFools 5y ago
this is centralization with extra steps.
- rawtxapp 5y ago
  How so?
  - ChainOfFools 5y ago
    the rise and consolidation of settlement channel aggregators is going to lead to another visa / Mastercard style duopoly, "but with blockchain."
    - minsc__and__boo 5y ago
      Yep, it's like lightning is moving closer and closer to credit cards, which was what blockchain was supposed to substitute.
    - rawtxapp 5y ago
      That doesn't make any sense, the channels are p2p, you can open and close channels with whoever you wish and your channel counterparties don't actually hold your funds, you hold them.
      - ChainOfFools 5y ago
        now you're making it sound like there's no need for channel aggregation at all. which is it?
        rawtxapp 5y ago
        I think we misunderstand each other, I'm talking about batching channel open/closes, I'm not talking about with whom you open channels.

jvanderbot 5y ago

That sounds fairly easy on a national exchange level, actually.

dragonwriter 5y ago
Unless the national exchange is hosting wallets it controls on behalf of individual citizens, or acting as an intermediary for all transactions—in which case you’ve negated all the features of Bitcoin and may as well be using any random currency with the government as shared banker—I don’t see how it does. I mean, sure, “the government will be your bank for free” solves the problem of the unbanked, but renders the identity and features of the underlying currency mostly irrelevant.
- chitowneats 5y ago
  Exactly. With this model, poof, there goes all your supposed benefits of "digital gold".
- reedjosh 5y ago
  Except the main benefit of BTC is really the lack of printability. Governments can't just make more of it even if they run the LN for their country. That said I don't think it will come to full LN centralization either. There are still other cryptos that have further benefits as well. Monero for example is fully private and can do ~1500tps on chain atm. Bitcoin adoption is just one avenue to competing currencies that bring freedom back. If the LN can remain distributed and bring anonymity to its users, then great, but if not there's still further alternatives, and with decentralized exchanges, governments won't be able to stop the use of a better system. Currency competition is just plain great for human rights and freedom.
- svachalek 5y ago
  Just like paying "Mastercard dollars" at the store means it might as well be pesos? Presumably for transactions that are worth paying blockchain fees, you'd use the blockchain.
  - 5y ago

SavantIdiot 5y ago

So "off chain" means LN holds the BTC in some other data structure then batches it up as one big transaction? Kinda like how a broker covers small retail trades until they hit enough volume to register an NYSE trade on the floor? Is that how it works? If so , this means lots of BTC is tied up in LN ... that seems dubious as heck.

admax88q 5y ago
Sort of. It's not entirely off chain. It's hedged in that a transaction is created sending X BTC between us, we repeatedly update that transaction off chain every time we move small amounts of money between eachother, then after Y days we submit the final transaction to the blockchain to resolve the total amounts. The idea being if one of us starts to be uncooperative, the other can just submit the transaction at its latest state so that we don't lose anything except that last update that we disagreed upon.
- cbm-vic-20 5y ago
  Most of the examples of Lightning that I've seen involve frequent transactions between small numbers of parties. How would this work in a retail transaction? For example, if I want to buy a cup of coffee from a shop that I visit infrequently?
  - nicpottier 5y ago
    My understanding is basically there's routing and there will be centralization of channels to some extent. One way to think of LN is that it is a wallet/debit card of sorts. You transfer some amount of BTC to a Lightning channel and that becomes your wallet. You can transact with that wallet quickly/cheaply but there's always the ability for that channel to be closed and put back on the chain with the last balance in the case of disputes etc.. But as you said, coffee shop needs some path to you to make that feasible. So then you get BTCVisa (c) or whatever, which is a channel provider that has built a network of channels open with lots of vendors. If you open a channel with them then you get to benefit from getting to use the wallet you already have. There is cross-channel routing of course so maybe that doesn't happen but it seems like a natural result. LN is neat in concept, but I'm not sure I really see the point compared to Bitcoin cash or the like that just say scale on chain. I guess we'll see.

thescriptkiddie 5y ago

LN now has routing, so you can open a single channel with a well-connected node and transact with everyone. They will charge you a fee for this, but it is on the order of 1/100th as much as a regular bitcoin transaction.

bruce343434 5y ago
Still all sounds really complicated, obtuse and unnecessary. They should've went with a cryptocurrency which is actually usable out of the box as a... currency.
- rawtxapp 5y ago
  And that crypto would be?
  - bigphishy 5y ago
    nano to name one
    - rawtxapp 5y ago
      Why? Are you saying that countries should start adopting a crypto with a market cap of barely 1B$, that's been around for a less amount of time, that's significantly less battle tested and that never recovered to it's all time high value? Do you think that the only thing that matters for crypto is speed and fees? You don't think trust/security/decentralization have any value? Bitcoin chooses trust and security above everything else, as it should. Then you can have layers on top where you transact at the speed of network packets.
      - bigphishy 5y ago
        Monero or ethereum, both superior to bitcoin in every way.
    - anonporridge 5y ago

djschnei 5y ago

If you believe LN is only useful between two parties that share a channel, I suggest you do more reading.

minsc__and__boo 5y ago

Precisely. Lightning scales with the number of transactions, but does not scale with the number of users. For that it still needs the bitcoin network to verify, and you're back at your transaction bottleneck but with added complexity.