In a discussion of SegWit activation on LTC, one anti-comment was all about LN being the equivalent of fractional reserve banking.
My hope was that someone could explain that to me?
Not fractional reserve banking, I understand that. I just don't understand how LN somehow = FRB.
It's mostly FUD but if economic concentration is too great, there is a risk of loss which some may characterize rather imprecisely as FRB.
The idea is if you had a channel open with the same entity as many others did, they could publish many transactions stealing funds and you would not be able to get your punishment transaction confirmed.
To mitigate this channels can be kept small, the punishment time large or people can just close channels whenever they feel the risk of keeping them open outweighs the benefits.