I also think decreasing the difficulty won't have the same effect because like what franky1 said it will speed things up and will ruin the countdown of the block reward halving.
If you wanted to reduce the block time target, let's say, to 1 minute, then you obviously can do the following:
- replace DifficultyTarget by DifficultyTarget/10
- replace BlockReward by BlockReward/10
- replace NextHalvingBlockHeight by HardForkBlockHeight + ((OldNextHalvingBlockHeight - HardForkBlockHeight) * 10)
and you will have, approximately, the same halving schedule and the exactly same coin supply.
The reason why block times are not reduced is actually, as some have already said, the higher orphan rate, that would lead to a less efficient system. But there is some research done in this topic, so it's not sure it won't be implemented at some point in the future if orphan rate can be decreased by technical improvements.
and use LN to make BTC into an Offchain Fractional Reserve banking system.
How would that be possible? AFAIK LN would not allow "fractional reserve" and that's the advantage it has over centralized off-chain solutions like Coinbase.