Quote from: DannyHamilton on January 23, 2018, 03:50:49 PM

Quote from: Kakmakr on January 23, 2018, 06:58:52 AM

The Lightning Network will encourage this, but in a different scenario, because people will fund channels to reduce fees on micro payments between them and a merchant that they use regularly.

That type of user won't likely be sitting on any blockchain bitcoins at all.

They will get an account at an exchange to purchase bitcoins. The exchange will open a channel with them, with the exchange funding the channel with some amount of bitcoins and the user funding the channel with 0 bitcoins.

When the user requests to "withdraw" funds from the exchange, the "withdrawal will just be a lightning channel transaction to the user. Those funds will be in the refund transaction INSTEAD of being on the blockchain. This makes the funds no more or less "out of circulation" than if the exchange had sent the funds to the user with an on chain transaction.

The merchant wants to be able to sell bitcoins when they receive them. Therefore they will open an account at an exchange. The exchange will open a channel with them, with the exchange funding the channel with some amount of bitcoins and the merchant funding the channel with 0 bitcoins.

If the exchange used by the merchant and the exchange used by the user are two different exchanges, then the exchanges will all most likely have channels open between each other funded on both sides with amounts that are calculated based on the net daily transfers between them.

Now when the user wants to pay the merchant, a route is established from the user back to the exchange where they got the coins and from an exchange out to the merchant. The user doesn't need to open a channel directly with the merchant. That would be a hassle for the merchant, opening individual channels with EVERY user that wants to buy something from them.

Now the merchant wants to sell those bitcoins, they don't need to close ANY channels. They just send the bitcoins that they JUST received form the merchant channel and send them back to the merchant over the same channel.

Ah, so the exchanges will function as payment hubs and customers will link to the exchanges and not to the merchants directly.

Interesting observation, but I see a problem here, when these exchanges goes down. We will have a single point of failure, if the backbone of this system is built on a network of centralized hubs.

The exchanges will in a way function as centralized payment processors and if we have to rely on centralized authorities to "channel" our payments, then we are moving away from the original idea behind Bitcoin being P2P.

I am on the wire with this kind of implementation of LN, because I am a strong believer of not having to rely on centralized authorities, to be able to do transactions. You should still be able to open up "private" channels, without having to go through centralized third party services to make transactions.