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The Lightning Network: Turning Bitcoin into Money

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121–130 of 448 posts

Re: The Lightning Network: Turning Bitcoin into Money

#121
Why use LN when other simple L1 solutions already work great as money.

Litecoin (LTC) has cheap fees and lots of room. Bitcoin Cash (BCH) is constantly improving and has a ton of transaction room to grow, with increases if/when demand grows. Dogecoin (DOGE) not my favorite, but does work fine for the money use-case, but development, from what I can see is a bit stale.

With these existing simple solutions, I don't see why Bitcoin (BTC) has to be anything more than the unit of account other crypto projects value themselves against.

Re: The Lightning Network: Turning Bitcoin into Money

#122
post #99

Earlier quoted context omitted.

To get a pleasant experience today you also need to rely on third-parties to manage your channel, the very thing Bitcoin was set out to avoid.

Define pleasant. There a quite a few people happily using umbrel or similar products that allow you on the LN with minimal hassle.

Install app on phone, ready to receive and then send to anyone.

Umbrel and similar aren't even the same playing field here. Even if we disregard the tedious setup, you'll still have to manually open, close and refill channels.

It's disingenuous to suggest LN is even close to convenient without third-party reliance.

Re: The Lightning Network: Turning Bitcoin into Money

#123
post #32
post #5

A cool use of the Lightning network is the podcast 2.0 initative. Currently, as I listen to podcasts, I stream back satoshis (sats), value for value (I use Castamatic on iOS, fountain.fm is also an option on Android). You can also send messages with sats attached, called “boosts”. Creators can transparantly split the sats they receive over various goals (i.e. FOSS projects [opensats], or guests on shows). There are n…

How do you handle the tax implications of streaming sats? As far as I know, every payment with Bitcoin triggers a taxable event? Do you record a gazillion log entrys "Paid $0.0000145 for listening podcasts, Paid $0.000142 for listening podcasts ...", crunch all the numbers and then at the end of the year put that gigantic list into your tax declaration?

Tax does indeed tend to be a hard problem in these kinds of systems, but I think you (and most responses so far to your comment) are looking at it from the wrong end. It's the seller, not the buyer, that has to deal with taxes in most jurisdictions. For podcasts I'd expect the podcaster to be the seller and the listener to be the buyer.

Simplest example is the EU. When you sell a digital good to someone in the EU VAT is owed on that in the country in which the buyer resides, but the seller is responsible for collecting that VAT and then reporting and remitting it to the buyer's country.

The EU makes this simple. You can register with any EU country, and then report and remit you VAT for all EU countries to that one country's tax agency. That country's tax agency will then settle with the others. Ireland is a good EU country for this if you are a seller in a non-EU English speaking place. It takes about 10 minutes to register with Ireland online for this, and the quarterly tax filings with them are a simple CSV upload that you can also do in a few minutes.

Note that this means the seller has to know how much they sold to buyers in each EU country each quarter. That necessitates some form of tracking.

The situation is similar, but more work to deal with, in the US with sales tax and use tax. For sake of this discussion I'm just going to call both of those sales taxes [1].

It's more work in the US because (1) thresholds for taxability are often of the form "N transaction or $X in sales" usually with N = 200 so you can get above the threshold on a very tiny sales amount as opposed to EU where thresholds are based just on amount of sales, (2) sales tax is often the sum of statewide, countywide, citywide, and special taxing district sales taxes, so to actually figure out the tax on any given sale you need to know the full physical address of the buyer, and (3) while there is some cooperation among about half the states to do a system conceptually like the EU's, for the other half of the states if you meet their thresholds you need to register with, file with, and remit to each of them separately.

There is a way around this (besides just ignoring taxes). You can go through an intermediary that takes on legally the role of the seller. It is that intermediary that then needs to track how much is sold in each state and country and how much tax is owed.

That's how it works for app developers selling through the Apple app store for example. Until tax laws are changed to be more friendly to micropayments directly to content creators, going through some kind of store that aggregates content from multiple creators is probably the best we can legally do.

[1] A sales tax is a tax on the sale of something. A use tax is a tax on having something. The big difference is that a state makes the seller collect sales tax, but use tax is suppose to be dealt with be the person who owns the thing. It used to be that states could not force sellers to collect sales tax unless the seller had a presence in the state. So states would impose both a sales tax and a use tax, and the use tax was the exact same rate as the sales tax and had a deduction for the amount of sales tax paid. The net result was that if you bought something from an in-state seller they collected sales tax and you owed no use tax. If you bought something from an out-of-state seller, no sales tax was collected and you owed use tax on the full purchase price. If you travelled to another state, bought an item and paid sales tax to that state then brought the item home, and that other state's sales tax rate was lower than your state's use tax rate, you owed the difference in use tax.

The use tax exactly equalling the sales tax and being discounted by any sales tax already paid is because the Constitution restricts the states from regulating interstate commerce. Applying a higher tax to goods from out out of state than you do to domestic goods would run afoul of that. By making it so that the total sales + use tax was the same for imported and domestic item the state was not interfering with interstate commerce.

But a few years ago the Supreme Court overturned the cases that had said that states could not force sellers with no in-state presence to collect taxes. Now states can make out-of-state sellers collect the sales/use tax so for most purposes there is not much point in distinguishing between sales and use taxes.

Re: The Lightning Network: Turning Bitcoin into Money

#124
post #32

Earlier quoted context omitted.

How do you handle the tax implications of streaming sats? As far as I know, every payment with Bitcoin triggers a taxable event? Do you record a gazillion log entrys "Paid $0.0000145 for listening podcasts, Paid $0.000142 for listening podcasts ...", crunch all the numbers and then at the end of the year put that gigantic list into your tax declaration?

I'm of the opinion that the rules are behind the law when it comes to BTC. I am deeply uninterested in being anywhere near the legal case that challenges this! But currency exchange for 'ordinary purposes' is not taxed, if my company bought some Euros to pay for foreign goods and the Euro rallied against the dollar before the purchase, no tax is owed. Well, BTC is legal tender in El Salvador, and there's no rule that…

I don't think the OP was bringing up the FX tax implications, but rather tax on the sale of a service.

Re: The Lightning Network: Turning Bitcoin into Money

#125
post #97

Earlier quoted context omitted.

You say “less important;” I say “vast majority.” How is this better than Visa or MC?

for one, the base currency in question is uncensorable. e.g. I for one find it detestable that fruits and nuts sellers in Iran suffer immensely because of US sanctions. The idea that innocent citizens are being made to suffer for their governments policy (especially in more authoritarian countries) is gross. I see it akin to punishing a child for their parents behavior.

But you're taking transactions off of the base currency, so it no longer matters what the properties of the base currency are.

Re: The Lightning Network: Turning Bitcoin into Money

#126

Earlier quoted context omitted.

Double-check what happened in 1971. FDR took the US off the gold standard in 1933. From this point forward until present, there was never again domestic convertibility of notes for gold. Nixon ended Bretton Woods (which started in 1944) - but that pertained solely to international convertibility of notes for gold in foreign exchange. It was not the gold standard. It was occasionally referred to as the 'gold exchange…

> Money is already digital. We know, which being in a centralized MySQL database at the Fed made bailing out all the US elites in 2008 very easy.

The Fed didn't bail out anyone in 2008. Treasury did. Also, the bail-outs weren't grants, they were loans, and they have been re-paid yielding $110B in profit so far with plenty more to come. [1]

I was opposed to bail-outs in 2008 personally, but in retrospect it's very difficult to look back and say that it was anything other than an unequivocal success. Hundreds of thousands of jobs were saved and it was super profitable. With that in mind, I'd suggest a new stalking horse.

Also of note, I said the dollar was digital, not that it was centralized. The Fed doesn't have a central representation of all dollars in existence, the M numbers are estimates. The Federal Reserve System is a federated system, and money is created when loans are taken out at retail banks.

[1] https://projects.propublica.org/bailout/

Re: The Lightning Network: Turning Bitcoin into Money

#127

Earlier quoted context omitted.

You seem to have a very US centric worldview. Maybe ask some Turkish savers how they feel, or any number of endless examples worldwide where saving in their own government fiat isn’t a good idea.

you can bet your bottom dollar there are some nerds in Sri Lanka who are very happy to own bitcoin right now. they'll be able to spend it as soon as the electricity comes back up.

I think we can all agree that they'd be strictly better off with a digital dollar substitute like USDC than with Bitcoin, as of course they'd be down bad with Bitcoin.

Re: The Lightning Network: Turning Bitcoin into Money

#128

The problem I have with Lightning is it further validates the existence of Bitcoin - a decrepit and highly polluting technology which has at best has failed to achieve any of objectives in any meaningful way, and at worst recreated a financial system more exploitative and toxic than anything that came before it. Let it die already.

So you blame Lightning not for what it is, but what it enables? That doesn't make a lot of sense, especially given the creators built it to address the issues you raise here. With Lightning, micropayments for the Web can be a thing. Just because nobody has implemented it yet, doesn't mean it doesn't have a killer use case worth the cost of mining (which will decrease over a long period of time). Moving payments for A…

As others have explained, Lightning simply can't scale to any significant number of users - it would take months for a larger US state to all have channels, assuming all transactions on the Bitcoin blockchain for those months were new LN channels.

So either you use a trusted 3rd party that opens a single channel for a large amount of users (so, a fully centralized L3 over L2 LN over L1 BTC), or you can't actually use LN any more than you can use BTC.

Re: The Lightning Network: Turning Bitcoin into Money

#129

“We can make the blockchain actually work for payments if we take payments off the blockchain.” Sounds about right.

BTC and a lot of other chains are Level 1 (L1). Final settlement layers for transactions. To compare that to normal banking, your credit card is like an L5. Tons of things go on in-between your CC transactions before its actually settled even if it appears to be instant and final to the end user. Truth is crypto enthusiasts have been overly ambition in this space, insisting a single L1 chain will come along and be th…

How is this better than Visa and MC?

Re: The Lightning Network: Turning Bitcoin into Money

#130
post #115
post #113

Earlier quoted context omitted.

What do you mean by uncensorable? What does censorship have to do with sanctions hurting innocent economic participants?

if you sanction Iran, limiting their fruit sellers, you have to have means to track the trades in order to enforce those sanctions - lightening network is effectively untraceable at the moment (and tools built on top of bitcoin can make tracing payments provably impossible) which means the sanctions can't be easily enforced - no country is going to spend resources proving their businesses aren't doing fruit trades wi…

The physical fruits and nuts still have to be smuggled out of Iran and into a country supporting the sanctions for this to make sense. And the physical smuggling seems way more difficult than figuring out the payments.
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