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Bitcoin has a huge scaling problem–Lightning could be the solution

arstechnica.com

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Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#81

Post by kylnew »

zdfjkhiuj wrote: post #76
kylnew wrote: post #42

Earlier quoted context omitted.

It’s funny to say ‘replacing’ bitcoin to me because we talk like it had a strong value and use in the past but really this has all just been speculation since the start. We all seem in agreement that blockchain as a technology is legitimate but none of these currency implementations float my boat yet because of how highly speculative the whole market is right now. Aside: last week up I looked it up and sure enough th…

I don't think the blockchain is a good technology. Traditional databases or something like Git solve the same problems better. I have an ideological desire to see more trustless and peer-to-peer systems and I think they'll take hold eventually, but at the moment blockchains are worthless.

There’s a lot more I could know about the practicality of blockchain but the value of the technology is still more real than the currencies that live on it. It seems to me, in my perhaps naive opinion, that in the long run blockchain might just be a way to make digital certificates of authenticity for digital goods that need a guaranteed uniqueness feature.

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#82

Post by Klathmon »

EthanHeilman wrote: post #80
Klathmon wrote: post #37

Earlier quoted context omitted.

Don't channel factories only allow you to move channels between users who were a part of the original multiparty transaction? It's a fantastic idea, but I feel it more has usecases between popular hubs and less for actual users. Although they also have the side effect of making the initial transaction on the blockchain up to 90% cheaper, so they are useful there too!

>It's a fantastic idea, but I feel it more has usecases between popular hubs and less for actual users. Won't actual users be connected to popular hubs? For instance Alice's connects to Hub1, Hub2, and Hub3 via a channel factory.

That is true! The biggest downside with channel factories is that noncompliance from one party forces the whole factory to close and reopen without them, which gets much more likely with every added participant. But if there is only one participant which is "untrustworthy" (on some level, in the sense that they aren't trusted to stay online as much as well known nodes are), then the system could work fine.

That's really interesting, and opens up a lot of ideas. Still, I think we should avoid trying to bring up channel factories for now. They are still a few steps away as they add more complexity to an already complex system. Focus on getting LN up and working, then add in nice-to-haves like channel factories slowly once vendors are on-board.

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#83

Post by JumpCrisscross »

Klathmon wrote: post #75
JumpCrisscross wrote: post #72

Earlier quoted context omitted.

> You can also take money out of LN at any time (assuming your counterparty I cooperative) This isn’t what people mean when they imply liquidity. Needing consent and being able to unilaterally demand cash are different domains. The former is e.g. a holding in a fund or coins in a LN, the latter is a consumer checking account. > Id love it if my bank could give me 2x my money if it takes more than 3 days for me to get…

>This isn’t what people mean when they imply liquidity. Needing consent and being able to demand cash are different domains. I don't understand what you are trying to say here. You don't need "consent" if you want to wait the 3 days, but if you get "consent" from your counterparty you can get it instantly. 3-days is about as fast as ACH. But if you want, you can feel free to open channels with shorter locktimes if ne…

> if you get "consent" from your counterparty you can get it instantly. 3-days is about as fast as ACH

You said, like a checking account, one “can also take money out of LN at any time.” I clarified that when people say “take money out at any time,” they mean unilateral liquidity. You can unilaterally demand cash or an instantaneous Fedwire transfer, the latter which costs 3 to 69 cents [1] (though some banks heftily upcharge this service), against your checking account balance. It takes a good deal longer to settle a LN balance (theoretically).

TL; DR The Lightning Network has some neat features, but pitching its liquidity as analogous to a checking account’s is disingenuous.

> you can't lose money if LN is working correctly

This applies to anything. In finance, things never work correctly because someone, somewhere, can be trusted to be an arsehole.

> It's literally not possible to fractionally lend on LN

The number of Americans who have lost a single U.S. dollar to this threat since the FDIC was formed is basically zero. The number of Americans who have nuked substantial fractions of their net worths speculating on Bitcoin is significantly greater.

[1] https://www.federalreserve.gov/paymentsystems/fedfunds_corep...

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#84

Post by JumpCrisscross »

kbody wrote: post #79
JumpCrisscross wrote: post #73

Earlier quoted context omitted.

> It's an evolving software still in pre-alpha state Now imagine a start-up in this state was hocking shares to college students and grandmas at a $140 billion valuation.

I was talking about Lightning Network nodes, not Bitcoin. Bitcoin at one point was at this stage but through iterations and continuous improvement it evolved to being able to secure all those funds. The point is that it's disingenuous to deem a new tech dead, while the engineers working on it sill say that it's not yet fully-ready for production. The implementation and the protocol still evolves, but the core idea be…

> I was talking about Lightning Network nodes, not Bitcoin

The latter being useless as a currency, per the article, without the former.

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#85

Post by [deleted] »

lalaland1125 wrote: post #15

Lightning appears to add more problems than solutions. It has a whole bunch of critical issues. Here is a short list. 1. You need to have a computer constantly online or your counter party can easily steal all your money. This leaves you vulnerable to all sorts of attacks. 2. The lightning network works by routing payments through a network to your destination. The issue here is that the routing for the lightning net…

[deleted]

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#86

Post by bytefactory »

ericb wrote: post #20
bytefactory wrote: post #11

Earlier quoted context omitted.

Opening a Lightning payment channel doesn't require your master private key. You'd create an initial transaction using your primary wallet (which would presumably be in cold storage) to open the Lightning channel and fund it. There's no relation between the two, _at all_. A funding transaction is no different from any other transaction. By design, the Lightning hot wallet can only hold small amounts of BTC (0.042 BTC…

> doesn't require your master private key So it does require the private key to your hot-wallet to be on an always on, networked machine, right? And the hotwallet and lightning channel can only transmit, across all channels, as much as is in this hot-wallet, and each channel has a potentially higher and rising transaction cost to open as lightning network will generate more transactions to the blockchain, not less. S…

> So it does require the private key to your hot-wallet to be on an always on, networked machine, right?

No. You can have the private key in an offline hardware wallet like Ledger, with the lightning app on your machine waiting for the device to sign it.

> And the hotwallet and lightning channel can only transmit, across all channels, as much as is in this hot-wallet, and each channel has a potentially higher and rising transaction cost to open as lightning network will generate more transactions to the blockchain, not less. So you can keep your cake safe, or eat it, but not both.

Let's break this down:

>lightning channel can only transmit, across all channels, as much as is in this hot-wallet

No. Each channel has its own limits, and there's no limits to the number of channels you can open.

> each channel has a potentially higher and rising transaction cost to open as lightning network will generate more transactions to the blockchain, not less If you want to open a lot of channels, yes, each one will incur a blockchain transaction. Keep in mind though that you don't need a channel per payment/per payment provider. Payments are _routed_ to your recipient via the network, in up to 20 hops, so you don't need to have a channel open to your recipient directly.

Also, in theory this should lead to _lower_ transaction fees on the network, not higher. Lightning transactions need to be segwit by design, so there's a 75% discount to each transaction. Since each channel can have an unlimited number of transactions on it, this should lead to a massive number of transactions moving out of the main blockchain into LN channels. Additionally, the channels can be opened whenever you want, so you don't have to wait till you're paying for your coffee to open the channel. If you don't mind waiting for a few blocks, you can open the channel for cents.

We don't know how this plays out in practice, of course, so we'll have to wait and see.

Edit: formatting

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#87

Post by lalaland1125 »

kbody wrote: post #57
lalaland1125 wrote: post #15

Lightning appears to add more problems than solutions. It has a whole bunch of critical issues. Here is a short list. 1. You need to have a computer constantly online or your counter party can easily steal all your money. This leaves you vulnerable to all sorts of attacks. 2. The lightning network works by routing payments through a network to your destination. The issue here is that the routing for the lightning net…

Wow, I guess it's dead then /s It's an evolving software still in pre-alpha state. But the core idea is solid and if you follow the development you'll see the strides of progress that is being done on all fronts. To your points. 1. Depending on the options you set to your channels, you could have a window of days (or anything the two parties agree to), to act in case the other party tries to broadcast outdated TXs i.…

Do you happen to know where I can find the code or white paper for the current, working, routing algorithm?

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#88

Post by UncleEntity »

lalaland1125 wrote: post #15

Lightning appears to add more problems than solutions. It has a whole bunch of critical issues. Here is a short list. 1. You need to have a computer constantly online or your counter party can easily steal all your money. This leaves you vulnerable to all sorts of attacks. 2. The lightning network works by routing payments through a network to your destination. The issue here is that the routing for the lightning net…

> Lightning has huge capital costs. You need to lock up large amounts of bitcoin in these channels for significant amounts of time.

Isn't that kind of the point?

You conduct your day to day transactions outside the bitcoin network and (presumably) only need to hit the blockchain on rare occasions. Or so I assume not having read the whitepaper.

Having studied the history of money and banking in a previous lifetime I'd say it's more akin to gold backed deposit certificates with guarantees against double-spending and fractional reserves.

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#89

Post by EthanHeilman »

Klathmon wrote: post #82
EthanHeilman wrote: post #80

Earlier quoted context omitted.

>It's a fantastic idea, but I feel it more has usecases between popular hubs and less for actual users. Won't actual users be connected to popular hubs? For instance Alice's connects to Hub1, Hub2, and Hub3 via a channel factory.

That is true! The biggest downside with channel factories is that noncompliance from one party forces the whole factory to close and reopen without them, which gets much more likely with every added participant. But if there is only one participant which is "untrustworthy" (on some level, in the sense that they aren't trusted to stay online as much as well known nodes are), then the system could work fine. That's rea…

I agree there is enough to do with getting the LN up and running. However the future of layer two protocols is extremely bright and the current limitations of the system are clearly surmountable. Add op code support for channel factories and you can change key sets on an arbitrary number of factories with one 200 byte on-chain transaction.

Given all the money flying around ICOs, it is pretty amazing that there isn't more money flowing into layer two. Hopefully that will change in 2018-2019.

Re: Bitcoin has a huge scaling problem–Lightning could be the solution

#90

Post by amluto »

I think that the end game of Lightning is very bad. Imagine that Bitcoin remains relevant and continues to have huge market cap for several years and that Lightning takes off to the point that most transactions use Lightning and the cost of an actual on-chain transaction drops to a few tens of cents. The reward for mining a block will drop significantly (as originally planned in the Bitcoin design), and the transaction fees per block will also drop significantly.

On the flip side, with Lightning, it's possible to steal quite a lot of money if you have the ability to prevent transactions from being mined (i.e. if you can mount a 51% attack). In particular, you can prevent any penalty transactions against yourself from ever showing up on the blockchain.

In other words, Lightning will drive the profit available from 51% attacks up and will drive the profit available from honest mining down. What happens when they cross over?

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