And miners could also open well-connected LN nodes, integrate them into channel factories charging a small fee for "recharging" channels etc. . It is short-sighted if miners oppose LN because they fear a smaller income stream from transaction fees, because if LN is a success, then the growing user base will compensate them for transactions which go off-chain (which already exist, albeit via centralized services like Coinbase). Even Jihan Wu once wrote on Twitter, "miners love LN".
The reason why I think that LN will not replace on-chain tx completely is more related to the security concept of LN, which in my opinion isn't really suited for transactions where your life depends on (e.g. your salary). Instead, I expect people using LN as a "prepaid card", recharging their channels (via LN/channel factories) with e.g. 100-500$ per month and then doing all the small transactions via this method.
The reason why I think that LN will not replace on-chain tx completely is more related to the security concept of LN, which in my opinion isn't really suited for transactions where your life depends on (e.g. your salary). Instead, I expect people using LN as a "prepaid card", recharging their channels (via LN/channel factories) with e.g. 100-500$ per month and then doing all the small transactions via this method.
Then I guess that there will exist on-chain transactions after all. The most important thing here is that miners receive an income in BTC even if the LN is used. And according to your explanation, it seems that miners would still profit from the LN via the use of Channel Factories. As well as you do, I hope that people would also use the LN for small to medium transactions and leave the large transactions to the main chain.
This way, Bitcoin would retain its current level of security, as the amount of hashrate would be the same due to on-chain transactions being processed on the network. What's interesting of the Lightning Network is that it enables atomic swaps which could eliminate the need for an exchange (either centralized or decentralized) to swap from one coin to another. This feature could be useful, IMO, as well as watchtowers to keep the LN as strong as possible.
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The difference is that because LN transactions can be "reversed", there are two things to consider:
- you must always have a backup of all the transactions you interchanged with the other side of the channel (and with all sides of a channel factory)
- you must be online at least so often that nobody can reverse your channel state. This is, however, what "watchtowers" want to address.
It is however possible, that if a large hub wants to defraud most of its users, it could combine their LN attack with some other (double-spending?) attack, which could be dangerous if the hub is also a big mining pool. So for me it's crucial that the community should be wary that hubs do not grow to a size of more than a certain number (e.g. 10K) of users, and if possible, to use routes which avoid them. (It may not be entirely possible to figure out which hubs are operated by the same operator, which could be a problem. Need to think a bit about that. )
- you must always have a backup of all the transactions you interchanged with the other side of the channel (and with all sides of a channel factory)
- you must be online at least so often that nobody can reverse your channel state. This is, however, what "watchtowers" want to address.
It is however possible, that if a large hub wants to defraud most of its users, it could combine their LN attack with some other (double-spending?) attack, which could be dangerous if the hub is also a big mining pool. So for me it's crucial that the community should be wary that hubs do not grow to a size of more than a certain number (e.g. 10K) of users, and if possible, to use routes which avoid them. (It may not be entirely possible to figure out which hubs are operated by the same operator, which could be a problem. Need to think a bit about that. )
Yes. Maybe with the WatchTowers, the possibility of a double-spending attack would be reduced to a minimum, making the LN as strong as the main chain. Of course, the LN is still being tested, so it might take quite some time before it becomes resilient enough against such attacks. At least your explanation helped me clarify some of my doubts related to double-spending, but I'd need to keep reading more about the LN to know how it really works.
Bitcoin made a concious design decision not to increase the block size to make the network "scale out". That means the opportunity to increase the running of full nodes because the requirements for hardware to run them will not be high. That decision maintains decentralization and security.
To solve the problem of scalability in accordance to Bitcoin's design decision, a 2nd layer is needed. Bitcoin Cash is solving it by having everything onchain, but it will have to negatively affect decentralization and security.
Your fear that it might increase the fees astronomically are only that. When that problem arises, do you believe that the developers will leave it alone? There are already future plans to allow channels to add more Bitcoins if needed to refrain the users from opening and closing them as often.
To solve the problem of scalability in accordance to Bitcoin's design decision, a 2nd layer is needed. Bitcoin Cash is solving it by having everything onchain, but it will have to negatively affect decentralization and security.
Your fear that it might increase the fees astronomically are only that. When that problem arises, do you believe that the developers will leave it alone? There are already future plans to allow channels to add more Bitcoins if needed to refrain the users from opening and closing them as often.
Well, one thing for sure is that Bitcoin has the most prominent developers in the blockchain industry. Therefore, I think that fees rising over the long-term shouldn't become much of an issue, since solutions would be found to make the LN as better than ever. I'm so excited about this and hope to use the LN in the mainnet soon for everyday purchases at merchants that accept it.
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What is worrying in Bitcoin Cash's 32mb blocks is if it scales, it might isolate some full nodes and make it hard for them to sync and keep up to the rest of the network because of the higher hardware requirment.
That's an attack scenario for some bad miners to use to attack the network and isolate some full nodes deliberately. Security and decentralization are slightly given up for scalability.
That's an attack scenario for some bad miners to use to attack the network and isolate some full nodes deliberately. Security and decentralization are slightly given up for scalability.
Yes. Bitcoin Cash is going to become a quite troublesome cryptocurrency, as it grows in user adoption over time. What's worst is that it'll be constantly hard forking to increase its block size over time. Therefore, the bigger the block size, the higher the risk will be for BCH as it turns out to become extremely centralized. I'm glad that Bitcoin still has a 1mb block size limit, despite that it's not scalable this way. It helps to maintain its decentralization, and with second layer solutions such as the LN, the risk of centralizing the main chain is mitigated.
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I believe you are thinking of the worst case scenario. Let us leave that thought open and observe how it happens in practice.
Yes, we'll see what happens eventually. In the meantime, I guess it's up to buy Bitcoins while they're cheap as I have the feeling that they will skyrocket in value when LN becomes practical in the mainstream world.
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Yes, only time will tell. But never sell your Bitcoins.
You bet I won't. After all, Bitcoin will continue to soar in value once the LN becomes stable and practical in our world. What's best is that over time, Bitcoin becomes scarcer, which shows that it's prone to become more valuable in the future. I'm hoping that it reaches a price goal of $50,000 and beyond.
