This site lists 1450 different cryptocurrencies. I wonder how many of them can be used as actual currency. Bitcoin adoption has stalled and at least one big vendor (valve/steam) dropped it because of the price instability.
1. Bitcoin remains speculative and volatile. This will cause it to be adopted by smaller businesses that can "do things that don't scale". We won't see big businesses support mainstream crypto payments until the demand is high enough to justify the risk.
2. Bitcoin itself is a clamped network, as such the fees are very high. You can't sell Lemonade at your stand with Bitcoin if the fees are much greater than the cost of a cup of lemonade.
Other cryptocurrencies aim to solve these problems.
The lightning network is essentially instituting central banking all over again, this time with bitcoin. "Oh so you want to transfer coins quickly? Better keep them at well connected exchange so it can be instantaneous, and you'll only be transferring between exchanges by the way."
Transactions can be routed through multiple channels, you don't need to open a channel to every single wallet you want to transact with. That would not be a Lightning network, it would just be payment channels.
> The lightning network is essentially instituting central banking all over again, this time with bitcoin. "Oh so you want to transfer coins quickly? Better keep them at well connected exchange so it can be instantaneous, and you'll only be transferring between exchanges by the way."
Not even close to central banking, LN transacts real Bitcoins, not IOU's, so they can't print more base money or more debt-based money. There's also no trust needed (no counter-party risk and you can route around censorship attempts)
Of course, trusting your counterparty requires you to know who they are, have stable addresses and so on.
The simplest case is a unidirectional channel. To pay you a series of micropayments, I send a series of transactions with each one slightly larger, so each is the sum of all my payments. You can only submit one such transaction to the blockchain. I lock my funds so you don't have to worry they won't be available.
Bidirectional channels and networking are elaborations on this idea. In bidirectional channels the main risk is that your counterparty will submit an obsolete state; there has to be a delay and you have to monitor the chain so you can submit a more recent state if that happens. You don't have to know who the counterparty is.
(Your analogy to a ledger with account balances is precisely correct for Ethereum, but Bitcoin actually has a somewhat different model.)
> (Your analogy to a ledger with account balances is precisely correct for Ethereum, but Bitcoin actually has a somewhat different model.)
My understanding is that in bitcoin it's a log of transactions -- a ledger. Ethereum is instead addresses holding totals -- more like an account statement.
I guess I've been misusing the term "ledger." You're exactly right for Ethereum. Bitcoin has transactions with "unspent outputs." Each transaction can have multiple inputs and outputs; to make a transaction you collect unspent outputs from previous transactions, use them as your inputs, and typically make two outputs, one to the payee address and one that holds the change.
1 point by fgonzag 0 minutes ago | edit | delete [-]
I know you can chain multiple channels. I've read the paper. Anyone with a relatively basic math background can see the problems the lightning network will not work as a "decentralized" network.
So you'll end up with many hubs, and you'll have to open a channel from your wallet to a hub (or multiple hubs) if you want to be able to pay or receive payments from (insert random wallet here). These hubs will take a cut to process payments. The more hops you have between two wallets, the more fees you'll have to pay (as you'll have to pay a fee for each hop). We just turned into VISA and Mastercard.
That's without mentioning the high capital reserve requirements that hubs will be forced to have, and how easy it would be to DDOS a specific hub by abusing the nLoc timer, especially since the transaction can only be forced to close if the only pending acknowledgement is from the originating wallet. Every other hop can essentially hold off for 1 day.
Not only is the "network" part of LN referring to the ability to chain multiple channels together to make payments several hops away if needed, but why would exchanges be the only one you could transfer to?
Currently on mainnet a VPN vendor is really the only major player, and it's expected that most vendors will have a lighting node, as all it requires is an always online server...
Not to mention that transacting over LN has no counterparty risk, and "keeping a graph of every connected wallet" is not an impossibility... It uses the TOR protocol which runs over IP, which are both the kinds of networks of channels you imply are impossible here...
It sounds like you read the first 2 paragraphs of the paper and decided to stop. Read more, and these details will be explained in excruciating detail.
Why is that remotely relevant? Why would I want my wallet 'connected' to any wallet I'm not going to transact with?
This post on reddit would be a good place to get understanding of the current LN status.
There is also a risk with accepting credit card payments, which is part of the reason why businesses don't actually process credit card payments themselves. They outsource that to a specialized third party that deals with the risks, like Stripe. The same thing is true for Bitcoin; almost every online store uses BitPay, who take care of the claimed volatility risk.
(Also, there was a pretty stable three-year period for Bitcoin from early 2014 to late 2016 or so. Widespread adoption failed to materialize, so it's not like "once it's stable it will miraculously be adopted by everyone".)
> the fees are very high
Yep. Fees, delays, and unreliability are the actual problems of the moment.
Under the hood how do they do that? Are are they converting your BTC to USDT on-deposit, then additionally from USDT to BTC on-withdrawal?