Comparison of Offchain Solutions for Crypto Coins
Exchanges
Gift Cards /Visa Cards
Lightning Network
Exchanges offchain transactions
Advantages:
Offchain transactions, allowing any of the exchange's cyptos to be used in a Micro-Payments
Speed : Instant
Transfer Fees : extremely low or none
Transfers to user name instead of long crypto address
No limits on amount deposited or transferred
No Time Locks , amount can be withdrawal immediately
Any coins stored on the exchanges can be used, no segwit needed.
Funding can occur as fast as the individual coin blockchain allows
Unlimited Transactions offchain, with no requirement for any Onchain transactions (User could transact forever offchain)
Disadvantages:
Centralized Management
Fractional Reserve & Counterfeiting possible until Withdrawal confirms ownership
Exchange can steal all funds stored, (only recourse is legal action)
All people that you transact with , must be members of the exchange
KYC/AML regulation per Kakmakr
Gift Cards /Visa Cards, once purchased or funded
Advantages:
Able to purchase items and services in the standard fashion and uses existing equipment most vendors already own.
Transfer fee limited to 1 transfer of the specific coin used to buy the gift /visa card funds
Easy to refill
No worries of Fractional Reserve or Counterfeiting
Uses the Gift /Visa Card's network to offload additional transactions from Onchain
Only 1 onchain transaction needed to purchase funds per fill-up
Actually use Visa Network to have access to their Offchain Scalability
Disadvantages:
Limit of $2000 purchased per day
IDs must be shown on very large purchases
Limited to specific vendors accepting Gift / Visa Cards
Some cards lose value with monthly fee or yearly inactivity fees
KYC/AML regulation per Kakmakr
Lightning Network
Advantages:
Offchain transactions, allowing segwit cyptos to be used in a Micro-Payments
Speed : Faster than onchain transactions
Transaction fees : lower than onchain
Funds are harder to steal, and usually revert to the original owner after time lock expires
Move transactions offchain to avoid updating onchain capacity
No KYC/AML regulation currently required. per Kakmakr
Disadvantages:
Requires both parties fund a channel ,
Requires 2 time locked Onchain Transaction per Party , meaning a single LN offchain transaction requires 4 onchain transactions
Fractional Reserve & Counterfeiting possible until Withdrawal ONCHAIN confirms ownership
Only works with coins with segwit in their code
The more hubs required to make a connection, the addition of a fee per hub to complete.
Other User must be part of the LN network , unless they are using a 3rd party Custodial LN Wallet
Cant Handle Large Transactions Yet (large transactions amount listed at over $200)
The Goal of this topic is to explore exactly the advantages & disadvantages of these offchain options.
So please share your opinions and if you are exploring an additional offchain solution, please detail it with it's advantages and disadvantages.
Also for the sake of this discussion , it is understood that LN can be used with any crypto coin running segwit code,
so any advantages or disadvantages listed should be generalized to all crypto and not specific to one.
Exchanges
Gift Cards /Visa Cards
Lightning Network
Exchanges offchain transactions
Advantages:
Offchain transactions, allowing any of the exchange's cyptos to be used in a Micro-Payments
Speed : Instant
Transfer Fees : extremely low or none
Transfers to user name instead of long crypto address
No limits on amount deposited or transferred
No Time Locks , amount can be withdrawal immediately
Any coins stored on the exchanges can be used, no segwit needed.
Funding can occur as fast as the individual coin blockchain allows
Unlimited Transactions offchain, with no requirement for any Onchain transactions (User could transact forever offchain)
Disadvantages:
Centralized Management
Fractional Reserve & Counterfeiting possible until Withdrawal confirms ownership
Exchange can steal all funds stored, (only recourse is legal action)
All people that you transact with , must be members of the exchange
KYC/AML regulation per Kakmakr
Gift Cards /Visa Cards, once purchased or funded
Advantages:
Able to purchase items and services in the standard fashion and uses existing equipment most vendors already own.
Transfer fee limited to 1 transfer of the specific coin used to buy the gift /visa card funds
Easy to refill
No worries of Fractional Reserve or Counterfeiting
Uses the Gift /Visa Card's network to offload additional transactions from Onchain
Only 1 onchain transaction needed to purchase funds per fill-up
Actually use Visa Network to have access to their Offchain Scalability
Disadvantages:
Limit of $2000 purchased per day
IDs must be shown on very large purchases
Limited to specific vendors accepting Gift / Visa Cards
Some cards lose value with monthly fee or yearly inactivity fees
KYC/AML regulation per Kakmakr
Lightning Network
Advantages:
Offchain transactions, allowing segwit cyptos to be used in a Micro-Payments
Speed : Faster than onchain transactions
Transaction fees : lower than onchain
Funds are harder to steal, and usually revert to the original owner after time lock expires
Move transactions offchain to avoid updating onchain capacity
No KYC/AML regulation currently required. per Kakmakr
Disadvantages:
Requires both parties fund a channel ,
Requires 2 time locked Onchain Transaction per Party , meaning a single LN offchain transaction requires 4 onchain transactions
Fractional Reserve & Counterfeiting possible until Withdrawal ONCHAIN confirms ownership
Only works with coins with segwit in their code
The more hubs required to make a connection, the addition of a fee per hub to complete.
Other User must be part of the LN network , unless they are using a 3rd party Custodial LN Wallet
Cant Handle Large Transactions Yet (large transactions amount listed at over $200)
The Goal of this topic is to explore exactly the advantages & disadvantages of these offchain options.
So please share your opinions and if you are exploring an additional offchain solution, please detail it with it's advantages and disadvantages.
Also for the sake of this discussion , it is understood that LN can be used with any crypto coin running segwit code,
so any advantages or disadvantages listed should be generalized to all crypto and not specific to one.