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The Lightning Network: Turning Bitcoin into Money

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251–260 of 448 posts

Re: The Lightning Network: Turning Bitcoin into Money

#251

Earlier quoted context omitted.

That just sounds like banking with extra steps.

Spoken like someone who doesn't know the steps involved in opening a bank account (hint: many people can't), accepting online payments using a bank account (hint: hope you have deep pockets), using a bank for sending interbank/international payments (hint: might need to collect a page worth of information from your recipient. second hint: their bank might refuse to receive the payment), etc. Bonus steps: do all the a…

You can set up a stripe account to accept payments very easily.

You can buy a prepaid Visa with cash in just a few minutes.

Re: The Lightning Network: Turning Bitcoin into Money

#253
post #164

Earlier quoted context omitted.

but what's the benefit of these? - decentralised: why is this good? - trustless: I trust the companies I use, it works - censure resistance: OK, fringe case for most - pseudonymous: why do I want anyone to be able to see my transaction history?

> The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy…

> Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.

Right, which is why we have regulations on reserve requirements for banks, as well as things like FDIC insurance that guarantees your money in a bank account.

Re: The Lightning Network: Turning Bitcoin into Money

#254

Earlier quoted context omitted.

That's almost the opposite of what I said. My whole point was that it's possible to use non-blockchain payment systems (e.g. Lightning) to transact in Bitcoin while still reaping many of its benefits. I guess if you wanted to sarcastically quote me, you should have gone with "Bitcoin is better because fiat currencies don’t even have a blockchain." (a statement I agree with).

Why is blockchain better than a centralized database for the end user? What specific advantages does it offer to me when I go to 7-11 and buy a Slurpee with my watch, which is how I do it now?

Third attempt: it's not! The Bitcoin blockchain is not suitable for day-to-day transactions like buying a Slurpee. You should use your watch and a centralized database to do "offchain" BTC transactions instead[0]. The real question is: why is BTC better than fiat (e.g. USD)? This is what I attempted to answer in my topmost comment.

[0] Or better, use the lightning network. As an end user, its benefit over more centralized alternatives like Paypal or credit cards is that it's an open network. You don't have to ask permission and open an account to start using it. Also, low fees. Also, your account can't be frozen or confiscated. Also, it works everywhere in the world and there are no extra fees for international payments. Also, you can do peer-to-peer transactions.

Re: The Lightning Network: Turning Bitcoin into Money

#255
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?

> As far as I know, every payment with Bitcoin triggers a taxable event?

tl:dr Unlikely

Unsure what the regime in your area does, but...

Here (Aotearoa) the tax authorities are not interested in rats and mice. I play in a rock band as a hobby. Occasionally we get paid ($300 is the most ever).

We had a promoter not pay us because we had "not given him the tax forms".

I contacted our tax authorities and was told, in no uncertain terms, if it is a hobby, if you are not making serious money, do not tell us about it. Please do not tell us.

We have a transaction tax here that merchants have to charge and pay, but only when their revenues top $50,000

So there are two data points that indicate that not every transaction incurs tax

Re: The Lightning Network: Turning Bitcoin into Money

#256

Earlier quoted context omitted.

I'll use my own example, I purchased a month of a VPN service using BTC when it was ~11k, it's about $5 in fiat per month. If you believe BTC will only go up, I don't see why you would want to spend it if your money will be worth more if you wait. Regarding Volatility, yes it leads to a lot of trading, I mean means of exchange as purchasing everyday goods. The transaction history of BTC also adds regulatory hurdles.

So if every grocery was to be priced in BTC, you wouldn't eat? :) Remember that the US was on the gold standard with a similar inflation profile to Bitcoin and consumers were consuming.

During the good times, you are correct that few people hoarded money in the hopes of deflation. During bad times, people actually do make this calculation (and so might be hamburger instead of steak). Deflation is believed to have significantly prolonged and worsened the Great Depression, and that experience was one of the motivating factors behind the global abandonment of the gold standard.

Re: The Lightning Network: Turning Bitcoin into Money

#257
post #123
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?

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 V…

Except that in the US, cryptocurrencies are treated as goods, and using them to buy something is considered a barter transaction.

For a barter transaction, you must recognize the current fair market value of the object received, and compare it with your cost basis of the object given. If the current price exceeds the cost basis you are required to recognize it as capital gains. (If below, you are generally allowed to recognize it as a capital loss, but recognizing capital losses is not strictly required, although in some cases there may be reporting requirements even if you chose not to recognize the loss).

Given the volatility of most crypto assets, there is a very good chance that the crypto is worth more than when you bought it, and assuming the goods are fairly priced, it would be typically be required to recognize the fair market value of the goods as current value of the crypto used to buy the goods.

Thus there is a meaningful burden imposed on people buying goods or services with cryptocurrencies.

Slightly different rules but with similar net effect would occur with respect to an individual us taxpayer buying things with say Euros, except that if the increase in value of the euro used in the transaction was less than $200, it does not need to be reported or taxed. Also for personal transactions the gains on a foreign currency are always treated as ordinary income, not capital gains, so no discount for long term capital gains will apply.

Re: The Lightning Network: Turning Bitcoin into Money

#258
post #204
post #44

One drawback of Lightning is that if you want to receive funds, and you don't have a direct channel to the payer, then you have to be online. It's an interactive protocol, you can't just publish an address and check it later. Since most people don't run their own servers, LN is pretty much going to be a custodial system.

the server you have in your pocket (your phone) is always online and supports multiple communications protocols (NFC, Bluetooth, Wifi, LTE, Audio...)

running an actual server on your phone would absolutely execute your battery life.

if we hadn't had NAT and reverse tunneling then things might have evolved differently. maybe a way to push data to phones over UDP or low power servers that could wake up to handle single requests. but it didn't play out like that.

Re: The Lightning Network: Turning Bitcoin into Money

#259

Earlier quoted context omitted.

That's almost the opposite of what I said. My whole point was that it's possible to use non-blockchain payment systems (e.g. Lightning) to transact in Bitcoin while still reaping many of its benefits. I guess if you wanted to sarcastically quote me, you should have gone with "Bitcoin is better because fiat currencies don’t even have a blockchain." (a statement I agree with).

How is Lightning not a blockchain system? It depends on a blockchain?

Yes, the lightning network is built on top of Bitcoin and depends on it but the transactions happen "off-chain". I was just making a generic claim about payment processors that enable "off-chain" BTC transactions, from the decentralized ones like Lightning to the completely centralized ones like Paypal.

Re: The Lightning Network: Turning Bitcoin into Money

#260
post #215

Earlier quoted context omitted.

Not exactly. Lightning means they receiver gets 100% what I send. This is particularly interesting for micropayments. I can tip someone 1 cent, or less with no middle man.

What's the incentive for anybody to open a lightning channel, providing connetivity etc. without compensation? And even if all of this was indeed done for free (sustainably, not as a loss leader): Dispute resolution and fraud costs money. Free leaves zero margin for either, and I wouldn't use a payment service not providing both.

The parent here is exaggerating. It's not free, just very very very cheap. Nodes with channels can set fees and get paid when they a transaction is routed through them.

There is work being done on non-custodial escrow services for LN. Here's one: https://lightningescrow.io

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