1. You need to have a computer constantly online or your counter party can easily steal all your money. This leaves you vulnerable to all sorts of attacks.
2. The lightning network works by routing payments through a network to your destination. The issue here is that the routing for the lightning network is extremely complicated and is currently an unsolved (and probably unsolvable) problem. The core issue is that you have to route money though a network where channel capacities are changing with each and every transaction. Imagine trying to route internet packets if the size of the links changed thousands of times per second.
3. It's relatively expensive to create and destroy channels at about two transactions per channel. Lightning proponents claim that this will be rare, but that can only be the case if there is minimal net flow of money. This is trivially not the case because users will be sending bitcoin more than they recieve and the reverse for retailers.
4. Lightning has huge capital costs. You need to lock up large amounts of bitcoin in these channels for significant amounts of time. There is a real cost for this in terms of the lost interest. Channels are certainly not anywhere close to free.
This isn't not the case. You can outsource channel monitoring to other peers in the network such that if anyone attempts to cheat you, they can punish the cheater and claim a reward. Bitcoin makes various security assumptions such as 51% of the mining power is honest, users have access to perfect information about the blockchain, etc... The LN, if the software is designed correctly, is likely to more realistic security assumptions than Bitcoin itself.
>3. It's relatively expensive to create and destroy channels at about two transactions per channel. Lightning proponents claim that this will be rare, but that can only be the case if there is minimal net flow of money. This is trivially not the case because users will be sending bitcoin more than they recieve and the reverse for retailers.
Channel factories[0] address this problem such that you can move channels between participants without touching the blockchain. There are also ways to do this whereby you switch n channels for a single transaction that spends log n outputs.
[0]: Scalable Funding of Bitcoin Micropayment Channel Networks https://www.tik.ee.ethz.ch/file/a20a865ce40d40c8f942cf206a7c...
It's a fantastic idea, but I feel it more has usecases between popular hubs and less for actual users.
Although they also have the side effect of making the initial transaction on the blockchain up to 90% cheaper, so they are useful there too!
3 doesn't really apply, as channels can be used as middle hops to rebalance.
If I give money to you for a good/service and drain my channel. Then I buy more Bitcoin from coinbase, coinbase can route that BTC to me through you to rebalance our channel so it is all on my side.
4 isn't true, as "locking the BTC up" is basically making it available. Would you consider depositing cash into a checking account "locking it up"? Because that's the equivalent here. But also locktimes are normally a few days.
3. The issue here is that the flow for all channels across the entire network needs to be about balanced for things to work out properly. Once someone starts either net accumulating bitcoin or net dispersing bitcoin, then there will be problems somewhere on some link.
4. I can take money out of my checking account at any time at no expense.
> If I give money to you for a good/service and drain my channel. Then I buy more Bitcoin from coinbase, coinbase can route that BTC to me through you to rebalance our channel so it is all on my side.
Could you point me to details about how cross-channel rebalancing happens?
Since lightning network channels are purely 1:1 (per the whitepaper); say you drained your channel to me, how does your channel with Coinbase allow you to route BTC to our channel without reopening a channel (requiring on-chain transactions)?
The whitepaper mentions hops, but I can't find any details on how they actually work.
> But also locktimes are normally a few days.
Does that imply that every channel needs to make an on-chain transaction every few days to reopen/keep the channel open?
> 9.5 Forgetting to Broadcast the Transaction in Time
> If one does not broadcast a transaction at the correct time, the counterparty may steal funds.
You need to be online all the time (or at least frequently enough) so that you can publish a penalty transaction if your counter party tries to steal coins from you.
So a micro-transaction is a 10 cent payment that can turn into a 20 dollar fee plus 10 cent payment?
Isn't that kind of the point?
You conduct your day to day transactions outside the bitcoin network and (presumably) only need to hit the blockchain on rare occasions. Or so I assume not having read the whitepaper.
Having studied the history of money and banking in a previous lifetime I'd say it's more akin to gold backed deposit certificates with guarantees against double-spending and fractional reserves.
That's actually false. The protocol actually limits channels to a fraction of a bitcoin currently (something like 0.1 or maybe even 0.01 BTC).
It's an evolving software still in pre-alpha state. But the core idea is solid and if you follow the development you'll see the strides of progress that is being done on all fronts.
To your points.
1. Depending on the options you set to your channels, you could have a window of days (or anything the two parties agree to), to act in case the other party tries to broadcast outdated TXs i.e. steal funds. Also you don't need to have a computer constantly online, you can offload the task to Watchtowers, software dedicated to do that for multiple users concurrently. (You also can have multiple Watchtowers as backups). Also, I imagine it could even be a mobile app. So this is a non-issue.
2. Routing will keep being improved but it's already pretty good and the way you present it screams FUD.
3. Currently crazy low fees aside, LN basically enables the multiplication of on-chain TXs population. I think your assumption is that the retailer will close and reopen a channel for every LN payment they receive which it makes no sense whatsoever from any point of view.
4. If by huge you mean $100 of which the fee is $0.5, sure. You can add any amount you want on an LN channel. Basically it's like a hot-wallet, e.x you can add $1500 for $0.5 fee, and casually spend it for coffees and other small expenses with lower TX fees than a satoshi (since LN supports fees at the millisatoshi = 1/1000 satoshi level).
P.S: This FUD-wave is pretty pitiful, at least get some real arguments. I hope even more people start to recognize that a lot of people have incentives to attack new tech in order to push their narratives for their altcoins or w/e.
Now imagine a start-up in this state was hocking shares to college students and grandmas at a $140 billion valuation.
Nothing to see here.
As for #4, I view it like a checking account. You need to have a bit of money set aside in liquid form in case you want to buy something.
Hence why a lot of us think it has no inherent value into the future. Of course, those in on the ponzi scheme will disagree with this sentiment.
Stellar is also a worthy contender although it wasn't designed with the purpose of payments, but decentralised currency/crypto exchanges.
The Lightning Network daemon codebase on Github is a beautiful well commented piece of Golang code though.
Not really. DAG/lattice based cryptocurrencies offer different security guarantees compared to blockchain based ones.
Nano is also interesting, but limited. In terms of moving value around, I think Stellar is more compelling.
Aside: last week up I looked it up and sure enough there’s a ‘PonziCoin’ out there
On the flip side, with Lightning, it's possible to steal quite a lot of money if you have the ability to prevent transactions from being mined (i.e. if you can mount a 51% attack). In particular, you can prevent any penalty transactions against yourself from ever showing up on the blockchain.
In other words, Lightning will drive the profit available from 51% attacks up and will drive the profit available from honest mining down. What happens when they cross over?
"In 2014, the volume-based transaction fees [for Fedwires] range from 2.8 cents to 69 cents per transfer" [1]. They charge an extra 15¢ if the quantity is over $10 million and another 36¢ if over $100 million. These transactions settle instantly and almost every bank gives consumers access to them (albeit with varying surcharges).
[1] https://www.federalreserve.gov/paymentsystems/fedfunds_corep...
Has it though? AFAIK it still has lower transaction volume than bitcoin.
Let’s see how it works out when adoption grows. If it doesn’t scale, then the timing for off-chain scaling will be more appropriate.
To give something to back me up, just look at the charts of BCH and it's main competitors: Litecoin and Dogecoin.
total # transactions: https://bitinfocharts.com/comparison/transactions-bch-ltc-do...
-> Litecoin does more than 2x the traffic of Bitcoin Cash and Dogecoin. Remark that Dogecoin sometimes handles more traffic than Bitcoin Cash.
Transaction fee: https://bitinfocharts.com/comparison/transactionfees-bch-ltc...
-> Dogecoin clear winner, Bitcoin Cash about the same as Litecoin (but remark that Litecoin handles double the amount of transactions)
So to be honest, I think Bitcoin Cash is just trying to ride the "Bitcoin" name, because for applicability, it doesn't seem to have any advantage over its direct competitors.
By design, the Lightning hot wallet can only hold small amounts of BTC (0.042 BTC currently), and yes, this would be essentially a hot wallet. The funds are held in a trustless, multi-sig, timelocked payment channel between you and your channel peer (which does not have to be the intended recipient). A channel can stay open indefinitely, and it will be possible to replenish it as needed. The idea is to have it function like a checking account. I fail to see how this is any different from a regular BTC wallet on your phone, or even your bank/investment app (except safer).If you're really paranoid about the funds in your hot wallet, you're free to create an m-of-n multi-sig wallet with somebody else you'd trust, which renders that attack vector useless.
Also, your LN wallet needs to remain online _only_ when it needs to transact. It can go offline the rest of the time with no problem. When it needs to make a LN transaction, it'll need to remain online for the duration of the transaction (a few seconds), or else the fund recovery mechanisms will kick into place.
So it does require the private key to your hot-wallet to be on an always on, networked machine, right?
And the hotwallet and lightning channel can only transmit, across all channels, as much as is in this hot-wallet, and each channel has a potentially higher and rising transaction cost to open as lightning network will generate more transactions to the blockchain, not less. So you can keep your cake safe, or eat it, but not both.
I'll take the bitcoin cash approach, please. Worse is better.
I'm sorry, but I'm not impressed. Let's build a solution that scales better on-chain and uses a more power efficient mining algorithm.
(Not because this is a good idea, but because I didn't know anything about the Lightning network.)
For example: « That means you can use a single payment channel to make lots of payments to many different people—all while generating just a handful of transactions on the underlying blockchain.»
I am no bitcoin expert, but AFAIK the bitcoin network can currently process in the order of tens of transactions per second, and that is a low number compared to the 50-100k transactions per second that VISA et similia are currently capable of processing.
So, many are "lots"? How many are "a handful"?
Seems like a large enough "overlay network" over cache reserves and bank accounts can be made barely traceable and pretty efficient.
For fast payments nothing beats a server with credit accounts. Naysayers will say that it defeats the purpose of bitcoin, but nobody thought bitcoin would entirely make banks and their fractional reserves system disappear. If anything, people will still want to borrow money.
Banks could function on top of cryptocurrencies, the difference would be that their clients would be able to withdraw their funds out of the banking system alltogether at any time, that is not just turning one credit into an other.
Why would banks function on top of something which has no use value, generates no returns and whose sole claim to be a useful asset rests on its fungibility, which is now inferior to that of currency except in cases of regulation evasion? If people are concerned credit instruments are too risky because debtors sometimes fail to repay, it makes no sense to swap it out of their portfolio for something with no more intrinsic value than a credit instrument but also no repayment obligations.
Before bitcoin, was there any currency that was also a payment method?
I would also add that though it's not great a payment method, it's not to a degree worse than payments in euros for instance. Bank wire transfers take up to three days in Europe. I don't hear anyone stating that this undermines the value of euro as a currency.
For scalability and robustness, one server won't cut it. You need a whole infrastructure to handle lots of payments securely.
I see various exchanges having trouble with scaling to support all their (new) customers, and basically they are doing the "single server" that you are talking about. Only at deposit/redraw they need to go over the requested blockchain.
So in that sense, what is your view on the latest generation of cryptocurrencies which have instant transactions and 0 fees (such as Nano)? Since I consider them the BitTorrent of currencies, I don't see how any institution could beat that.
Still, many companies have always required a few confirmation blocks before accepting a transaction, regardless of the amount. Like currency exchange companies, for instance.
2. My mom does not know how HTTP works and she uses the Internet just fine. It's naive to think that users are going to be explicitly opening and closing channels, finding best path, etc. These can be built into wallets and abstracted out. Besides, Bitcoin of today is already too complicated for the "average" person.
Lightning network is actual innovation and the next evolution in making Bitcoin easier to use for the masses. One step at a time.
