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How is the Lightning Network supposed to help? Bitcoin advocates say that the BTC network has to be slow to be secure and decentralized. If you start putting t

How is the Lightning Network supposed to help? Bitcoin advocates say that the BTC network has to be slow to be secure and decentralized. If you start putting transactions on a second blockchain, don't you lose all the security/validation of the BTC blockchain?

Quindecillion 4y ago
It's a trade off. Think of the difference between paying the deposit on a house vs. buying a coffee. Need a large transaction to settle with a high degree of security and finality, but "slowly" (i.e. ~10 minutes)? Do it on-chain. Need a small transaction to settle instantly and cheaply, but you trade that for some security and finality? Do it on the Lightning Network. Similar trade offs already exist in traditional finance. See inter-bank transfers and things like FedWire compared to payment networks like Visa and Mastercard. Some of those inter-banks transfers can take days to weeks to settle with finality and can be expensive. Bitcoin can settle in ~10 minutes relatively cheaply. Credit card payment networks charge a 1.5-3% fee on each transaction. Transactions on LN are a few sats or fractions of a sat... practically free. Automated micro-transactions are now practical with LN [1]. Also, the Lightning Network isn't a blockchain. [1] https://lightninglabs.substack.com/p/streaming-sats-why-bitcoin-is-not https://lightninglabs.substack.com/p/streaming-sats-why-bitc...
taolegal 4y ago
The point is that BTC network is for secure & decentralized final settlement. That's really the most important aspect of a sound money. For daily transactions Lightning bundles those transactions (as long as the channel exists) into a live tally based in a single BTC transaction. The beauty is that the Lightning protocol even uses the BTC protocol to coordinate that live tally over a channel, without having to commit it to the blockchain at every update. You don't lose security much, in fact you actually end up gaining privacy.

Quindecillion 4y ago

It's a trade off. Think of the difference between paying the deposit on a house vs. buying a coffee. Need a large transaction to settle with a high degree of security and finality, but "slowly" (i.e. ~10 minutes)? Do it on-chain. Need a small transaction to settle instantly and cheaply, but you trade that for some security and finality? Do it on the Lightning Network. Similar trade offs already exist in traditional finance. See inter-bank transfers and things like FedWire compared to payment networks like Visa and Mastercard. Some of those inter-banks transfers can take days to weeks to settle with finality and can be expensive. Bitcoin can settle in ~10 minutes relatively cheaply. Credit card payment networks charge a 1.5-3% fee on each transaction. Transactions on LN are a few sats or fractions of a sat... practically free. Automated micro-transactions are now practical with LN [1]. Also, the Lightning Network isn't a blockchain. [1] https://lightninglabs.substack.com/p/streaming-sats-why-bitcoin-is-not https://lightninglabs.substack.com/p/streaming-sats-why-bitc...

taolegal 4y ago

The point is that BTC network is for secure & decentralized final settlement. That's really the most important aspect of a sound money. For daily transactions Lightning bundles those transactions (as long as the channel exists) into a live tally based in a single BTC transaction. The beauty is that the Lightning protocol even uses the BTC protocol to coordinate that live tally over a channel, without having to commit it to the blockchain at every update. You don't lose security much, in fact you actually end up gaining privacy.