The Lightning Network: Turning Bitcoin into Money
papers.ssrn.com
papers.ssrn.com
I find this a very healthy counter movement to the current centralization that is going on in Podcasting where indie creators are being sucked into Spotify and YouTube (and sometimes are being censored there).
The podcast 2.0 movement is not all about value for value, there are also cool features like artwork per chapter, sharing of snippets, a way to specify different formats (like opus) for the same podcast/episode, and many more modern things. It’s a cool community and if you ask me, the first really useful thing to come out of “blockchain”.
Edit: Yeah I want to add some references but my company uses Cisco Umbrella and some things are blocked. Moreover, I can see it also MITMs my own websites (like my NextCloud instance), because those are not my certs!... But I digress.
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 guess this is a good question for the hosts of the podcasts that use these features (Like Linux Unplugged, and other shows from Jupiter Broadcasting or the No Agenda show by Adam Curry and John Dvorak.) Perhaps this is not answered yet.
In the Netherlands this only becomes relevant over a certain amount, and I think you can then just bundle all amounts. But I'm also not sure.
If you buy Bitcoin for $X and then buy something with those Bitcoin, then you have to record the "fair value" $Y of that something and pay taxes on $Y-$X. On the amount that your "Bitcoin speculation" has earned you.
Looks like in the Netherland, it is different indeed. Making it much easier to use Bitcoin.
Blockchain is remarkably ill-suited for micropayments.
Most blockchains are worthless and have nothing in the way of transaction fees or indeed transactions. Doge is perfect for micropayments! This was a fad on reddit back in the day.
In particular, well, the title of the article says it all. If you have BTC, and you want to send a few sats and pay basically nothing, Lighting has existed for years and works just fine.
Edit: I don't think micropayments are such a great idea to begin with, but the arguments for that have nothing to do with the medium of payment: assuming a perfect micropayment system, people still won't want to use it for off-topic reasons.
The fact that I personally know people keeping hundreds of thousands of dollar-equivalent-sats on Lightning, who are happy with that arrangement, is what I'm balancing against that guy on the internet with strong opinions with 'throw' in his name.
But hey maybe you know what you're talking about. It's possible. I don't.
Regarding my name: The short explanation is, I have a throwaway account in protest. If Satoshi's anonymity was enough to convince your friends to put down large sums of real money based solely on a hope, it should be enough for you to consider my (non-monetized) comments on this internet forum that's mostly pseudonymous anyway.
As for their happiness, I know people with a lot of Bitcoin, and I know a few people who are underwater on their BTC, but there's no overlap in those groups. They might feel a twinge around 7k, more likely, they'd buy as much as they can afford.
Bitcoin was not designed to be “maximally profitable to miners”, it was designed to be a currency that could not be captured and controlled by state actors or other large players yet would be able to sustain itself and its network by incentivizing miners to set up nodes and resist attempts at hostile takeovers of the network. [1]
No other solution has managed to achieve this. There are proof-of-stake cryptocurrencies that opt to be more easily scalable on L1 at the cost that they are controllable by whoever holds the largest stakes.
* support for millions of transactions per second
* very fast, basically instantaneous
* if a small fraction of transactions is dropped randomly, no big deal
* easy, simple, cheap on- and off-ramps
* support for anonymity
* good customer support (lost password, lost device, maybe chargebacks)
* support for local currency
* compatible with local law
* very simple API, easily integrated into browser or other devices
* energy efficient
For those requirements blockchain is a terrible solution.
But sure, you can use a helicopter to open a beer bottle, go ahead.
Lightning "solves" this problem by moving transactions off-chain, bundling them into batches, and then emitting batches of transactions to Bitcoin mainnet. That means a transaction against Lightning is only valid once the bundle in which the transaction is placed is committed on mainnet. A confirmation from Lightning isn't good enough; users have to wait for a confirmation from mainnet.
Batching is a common optimization! But it's not a solution to performance problems. It weakens the guarantees afforded by transaction confirmation. Those guarantees are important. They define the consistency model provided by the system. The model of Bitcoin which includes Lightning is fundamentally different, and weaker, than the core model of Bitcoin.
And so Lightning isn't a solution to the problem. It weakens the transactional model of Bitcoin, and so provides a totally separate system to Bitcoin proper.
Until then, you have deposited some value in a number of lightening network nodes and have been negotiating a set of pairwise IOUs with them for later.
DeFi/staking has a similar problem and I believe waiting until gains and losses are realized will be the way it goes down.
For now, make a good faith effort to pay taxes or expect some friction later.
wouldn't that be an easy way to bypass taxes ? make all your transactions off-chain and just withdraw once a year ?
I do 1000 streaming transactions on a channel. When the channel is closed (withdrawn back to the L1 chain, or settled - offchain is the wrong term here Lightning is an L2 "channel"), the transactions are summarized and you can tax that summary event.
It's a linear sum of taxes. Of course there are scenarios that complicates things like variable sales tax rates based on transaction type/location/good, but that's an extended conversation.
If you really want tax enforcement, governments should be looking to develop CBDC integration on the merchant side with bridge support for major crypto currencies. Given Intuit's iron grip on tax lobbying I don't have much hope for innovate tax schemes though.
IAAL. Specifically, a tax lawyer. It would not be reasonable to treat the on-chain event as sole the taxable event.
Every transaction in a cryptocurrency is a taxable event.
This is the same tax treatment that applies any time a non-USD currency is used in a transaction (by an American). Similar rules apply to citizens of EU countries.
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 the (in the above) Euros in question have to be paid to a country where the Euro is legal tender: perhaps they're a Singaporean business which mostly exports to Europe, so their prices are in Euros and it shouldn't matter.
The US might not like that El Salvator made BTC official, but that shouldn't matter either.
Better keep your books very carefully though, because buying currency with the intention of selling it later (aka exchanging it for another currency) is investment purposes.
BTC is a kind. If I pay you in silver rounds, you are responsible for paying income tax for the convertible value of the silver at the time of payment, but not capital gains at any point.
In that context cap gains vs other sorts of income is irrelevant.
They may also owe sales tax! https://support.patreon.com/hc/en-us/articles/360043054911-P...
Which, yikes, no wonder running your own business is such a drag, that feels like double-dipping to me. I didn't owe sales tax when I was freelancing, but it is what it is.
Either way though, it's not any sort of headache, because the dollar is still used as unit of account, and what's owed is the value at the time of transaction: what you owe on $500 delivered in BTC is what you owe on $500, presuming you turn it into cash within a year (IANAL, I recall that goods paid in kind become investments after a year, such that gains are owed if sold at a profit).
The problematic tax situation is when someone buys some Bitcoin, and then wants to spend it, since you have to figure out gains on each transaction and report it correctly, that's a huge hassle. I suspect most people who sincerely try to pay capital gains on Bitcoin purchases get it wrong: if you buy 0.1 BTC at 7K and 0.1 BTC at 45K, then spend $1000 worth at 20K, what capital gains do you owe? Does it depend on which wallet you reached into?
I have no idea and, really, feel like I shouldn't have to have any idea. It's the main thing that keeps me from paying in BTC when a vendor likes that form of payment. I could maybe pay a month's rent with the coin in my cushions, I have it because it tickles my fancy to pay for things with magic internet money, but it's just not worth the paperwork to actually do it.
I may have misread GP.
re: " if you buy 0.1 BTC at 7K and 0.1 BTC at 45K, then spend $1000 worth at 20K, what capital gains do you owe? Does it depend on which wallet you reached into?"
These are not new problems, stock works the same way. You may feel like you shouldn't have to have an idea, but that's not how any of this works in practice.
Can you imagine the hassle if a country adopted Apple stock as a legal tender? That's basically what happened last year.
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.
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.
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
One reason of course might be that i am listening to Jupiter Broadcast and Chris pushes this stuff hard, really annoying me with the constant talk about lightning and especially the boosts, which seem to take over half the show, because somehow he seems not to realize that the problem he has in getting regular supporters is the insane price he asks (last i looked about $2,50 per episode), but likes to give everyone several minutes of the show who sent him 20 cents.
But I think my misgivings go further than that and i am especially concerned about this taking over podcasts or even open source, because while I do understand that people need to eat, I think these two ecosystems especially thrive because so many people contribute to them without profit being their first motive. I would not ask people to do work for free, but I often find that that when profit comes into it, quality starts to suffer and ideals get lost.
Sure, lightning is in some ways similar to patreon etc. because it might still be user financed, but I feel the unpredictability of getting funds, the more attention focused model, will have similar effects on creators than other platforms with similar models do and I am mostly not fond of this.
I do like putting 100$ every (half?) year or so in my podcast app and letting the app distribute it over everything I listen to. But that's also because I'm at an age where I have disposable income. I pay for the membership to get the ads out of my fav podcast.
It also just undermines my skepticism and dislike of the podcasts 2.0 thing, which should have been my main point.
I always warn here on HN that we should not throw the baby away with the bathwater, meaning, don't kill (or over-regulate) blockchain before it can grow into something nice (from the monster it is now). Imho these are the seeds of something nice, but it's not there yet. I can feel it coming though, because of things like Podcasting 2.0.
But again, podcasting 2.0 also enables (as you probably heard many times by now ;)) life streams right in the podcast app. It just displays a badge that your fav podcast is now life-streaming and you can participate. I think that is just really cool.
Using the blockchain again though, you can make instant donations through BTC lightning, and have your value 4 value boosts live-read as you listen. I mean, that is at least a bit cool right? The equivalent of throwing some cash... Hmm, this is going in the wrong direction again...
We should absolutely throw away the bathwater. There's no baby. I'll say it right out. Cryptocurrency should be completely banned by every country on the planet. They have no purpose that isn't outright fraud and theft. Everything described in Podcasting 2.0 can be done with regular old Web 2.0 technology, and it can be done more efficiently that way too.
Edit to those downvoting: I will gladly retract this entire comment if you can demonstrate a single real, non-fraudulent usage of blockchains. I've been asking this for years and never gotten a straight answer. Everything is always "just around the corner" but every time I look around the corner all I see is more fraud and scams. If you really think there's something salvageable here, then let blockchains live on as a theoretical research project until somebody figures it out. In the meantime, please stop encouraging the general public to put their money into this. It's irresponsible to raise money this way.
https://www.hyperledger.org/learn/case-studies
Hyperledger is a set of open-source distributed ledger related technologies, the most well-known being Fabric, which is a framework for creating blockchain networks.
The most interesting cases are S&P Global and Walmart, who use it to keep track of data for various auditing purposes. The idea is that since data on a blockchain can't be modified on a whim without that change being observed, it protects the integrity of the data being stored. Basically it is being treated as a sort of database.
Blockchain doesn't rely on crypto, crypto was implemented using blockchain. Blockchain was invented long before crypto in the early 90s at Bellcore. Crypto may emphasize transactions and combating double-spending (due to nodes being on a public network), but no one is held to crypto's use of blockchain to be blockchain. The Bitcoin paper cites both the original Bellcore paper and its follow-up discussing the use of Merkle Trees, and the Bellcore paper cites patent documents as a potential use-case. So I think what S&P Global and Walmart are doing are valid use of the technology.
Now whether or not cryptocurrency itself or the networks they run on have value is a different story. For what it's worth, one of the use-cases for Corda that I found basically advertised itself as "we are better than transacting with paper" lol.
Audit logs are not a new thing. Immutable data stores are not a new thing. This can be done in any number ways, each of them more efficient.
Moreover, it doesn't help with data entry. Yes, data cannot be modified. And still someone orders bananas and ends up with mouldy tomatoes.
> S&P Global and Walmart, who use it
I very much doubt they use it. All these "use cases" fall apart within a year or two after initial starry-eyed announcements
> Basically it is being treated as a sort of database.
Indeed. Treated like a database. When people treat Kafka as a database, those people are derided and there are entire articles on why you shouldn't treat a read-only append-only log as a database. But sure. Once it's blockchain, it's amazing and the bee's knees.
1. People trying to make a currency or interoperable token that they can directly or indirectly profit from
2. People trying to replace traditional object-relational databases or P2P networking with the Blockchain
Neither of those are particularly meaningful to the average person. They buy their Cherry Pepsi with a Mastercard and then listen to Podcasts on Spotify or the preinstalled iPhone app. People won't care about this stuff until it's meaningfully integrated into our lives, which is something all of these cryptocurrencies have failed to do. There is no killer app, there is no data revolution. People have been beating this decentralization drum for decades, and nothing happened. If you think that Cryptocurrency is going to deliver us from surveillance capitalism into another digital golden age, then you're failing to see the entire picture. Luckily, proving this thesis right is simple: we just have to wait and watch as cryptocurrency values continue to plummet, and as VC interest in Blockchain-backed technology dries up. It's looking increasingly correct with every passing day.
It's fun being starry-eyed about cool tech, but the Blockchain is a failed experiment. Our suspected fears are true: running an anonymous, distributed and append-only ledger where anyone can be an operator is a bad idea.
From what I can tell people who want a fixed supply currency basically just want to sit on it, wait for idiots who actually create wealth to do so and then take an undeserved cut. In other words they want to take the economy hostage for their own special interests and turn the rest of the population into debt slaves and finally reinstate feudalism.
I imagine you don't. You probably invest because you don't want to lose your purchasing power. That's all. This is what fiat system makes us do.
I just want a currency that doesn't push me to have to invest my money all the time only to keep my monetary power. That's it. Simple as that.
You answered your own question, but there's also no reason to use a "centralized website" (i.e. a 3rd-party service) if it doesn't add value. You just handle the subs yourself and provide a unique feed URL in return.
this is the traditional model of subscription-based content, but Podcasting 2.0 is based upon the "value-for-value" idea, where listeners are encouraged to willingly give money to support the show, possibly in exchange for a shout-out (akin to YouTube "Superchats") or something like that. the model sounds unintuitive, but it has sustained No Agenda since the late '00s, and other shows as well.
another podcast I tune into every week and love does the Patreon thing. they do a free, public weekly show, and an additional bonus show only for paid Patreon subscribers. I pay them through Patreon (who takes a cut) for the privilege of accessing a link to an unlisted YouTube video each week to watch the bonus show (which they explicitly refer to as a "bonus Patreon podcast" in the show itself! why intertwine your brand with Patreon like this?!). each week the bonus show gets less than 100 views, yet the cohosts go out of their way to record an additional 30-40 minute show just for these under-100 viewers. this does not seem like a sound business strategy to me compared to value-for-value.
Yes, donations are the oldest monetization model for podcasts, and this is even easier to do than authenticated feeds. Certainly, it does not require "blockchain technology".
are there cool applications using Taproot and Schnorr? are lightning network openings and closings looking identical as any other transaction or script, improving confidentiality?
where are the current communities that talk about whats going on there? I don't visit bitcoin reddits anymore and the cryptocurrency communities are about pretty much everything else
smart contracts are a middle man, and not a great one from all the recent exploits executed on them
Correction: Lightning is a peer-to-peer payment network https://docs.lightning.engineering/the-lightning-network/pay...
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.
There is work being done on non-custodial escrow services for LN. Here's one: https://lightningescrow.io
Think of any network: Economic forces usually drive it towards centralization if not outright monopolization, especially if interfacing with end users (e.g. banks, electricity providers, ISPs, messengers...) unless there are (effective) laws in place prohibiting it.
> There is work being done on non-custodial escrow services for LN.
I'm very curious about efforts like that. Dispute resolution is extremely difficult to do in a way that is cost-effective, yet fair enough to not drive away either buyers or sellers.
The opposite is the case: Merchants almost always prefer not losing the purchase over a few bips saved on interchange and cardholders continue using their high-fee cards because issuers pay them kickbacks from that interchange in the form of rewards.
The exact same thing could happen with a dominant Lightning wallet provider (supporting channels only to their own nodes in exchange for a better user experience, incentives etc.) and merchants accepting Lightning.
Monopolization almost seems impossible to prevent at a technical level in networks due to the network effect (quadratic utility) and customers being relatively slow to change providers and easy to sway with one-time incentives. Credit cards have just had a few decades of a headstart over Lightning in that regard.
This is one of the main goals of crypto. By drastically lowering the barrier to entry, competition is higher and fees are lower. This is what filecoin is doing to AWS [1], what NFT tickets are doing to Ticketmaster [2], and what Lightning is doing to credit card companies.
[1]: https://file.app/
[2]: https://variety.com/2022/digital/news/web3-touring-ticketing...
As long you have some channels open and I have some channels open, the network will route my payment to you.
As sender, I am responsible for any potential routing fees. You as the payee are not.
If we were to transact with each other often, it could be worth opening a dedicated channel to enhance privacy and avoid routing fees.
Just like the internet. And just like on the internet, extortion by incumbents along that route can happen, and likely will once there is an encumbent Lightning wallet provider that is too large to ignore for merchants. (All assuming Lightning or something like it is successful in the first place, of course.)
> As sender, I am responsible for any potential routing fees. You as the payee are not.
In a typical online payment scenario, the customer is the sender. Of course large wallets could strike deals with merchants to let them cover fees for their users to make this less apparent...
> If we were to transact with each other often, it could be worth opening a dedicated channel to enhance privacy and avoid routing fees.
Sure – just like you could open a tab at your favorite bar, or you could get a store credit card at your favorite retailer.
This is plausible. Lightning Wallets are harder to run in a self custodial way rather than classic Bitcoin on-chain transaction.
> In a typical online payment scenario, the customer is the sender. Of course large wallets could strike deals with merchants to let them cover fees for their users to make this less apparent...
Wallet providers could turn in payment processors as well for merchants.
> Sure – just like you could open a tab at your favorite bar, or you could get a store credit card at your favorite retailer.
Not familiar with this concept, I know that it exists. Though the cost of establishing that system is mountains more than establishing a channel to your favourite bar. But it is a micro optimisation.
Meanwhile, devs in crypto are able to build without limits and are having an absolute blast larping as anime cats on Twitter while cranking on bleeding edge ZK tech and other exciting projects.
How so? Isn't the "cyberpunk dream" a dystopia?
https://en.wikipedia.org/wiki/Cyberpunk:
> Cyberpunk is a subgenre of science fiction in a dystopian futuristic setting that tends to focus on a "combination of lowlife and high tech",[1] featuring futuristic technological and scientific achievements, such as artificial intelligence and cybernetics, juxtaposed with societal collapse or decay.
It's the kind of world that's better to look at than actually inhabit.
I'm being facetious, but it's true. The average person is a weenie, and we rely on a great deal of well-maintained, centralized infrastructure to keep us going. There's a reason why people here fight to keep Fortnite off their iPhone and tries to bite the hand of anyone peddling crypto: deep down, we're all scared! We need corporations to coddle and exploit us, just like they need our money. HN, and the world at large, wouldn't want crypto even if it was "the right thing" to do.
All these crypto bros are the same. They would't survive a day if their vision of the future actually came to be.
Also see all the "crypto bros flock to centralised trusted courts to try and get their money back after yet another crypto scam":
- https://web3isgoinggreat.com/?id=coinflex-sues-roger-ver-to-...
- https://web3isgoinggreat.com/?id=hypernet-labs-shuts-down-sh...
- https://web3isgoinggreat.com/?id=former-asset-manager-for-ce...
etc.
What if you wanted to support 200 open source developers by sending $0.25 every month?
Google went from a research project to incorporated and usable on the internet in roughly two years with a total investment of about $2mm in 2022 money. Let's just say the pace of innovation had some serious roadblocks at the time (they literally had to build their own servers and host them in a garage). Not to mention the status of dev tools, frameworks/libraries, developer availability, etc in 1998 vs today.
We are four years in to A16z alone raising roughly $16 BILLION dollars with their crypto funds. For at least half a decade it's been routine to see announcements of various blockchain companies with $5mm seed rounds (and beyond). Follow-up Series A and beyond in the hundreds of millions with multi-billion dollar valuations.
I've been following the space extremely closely for over five years and I have yet to see an application or solution with that "WOW I need this in my life right now" factor. I still don't know a single person outside of the tech scene that uses anything blockchain related other than trading on an exchange.
Bitcoin is 13 years old with an ecosystem that has had an incredible amount of investment and man hours thrown at it yet we're still getting research papers on how to make the original premise of bitcoin (Peer to peer digital cash) actually usable at any practical scale.
I know LN has been live for some time yet looking at the best available numbers I can find it's only being used by an absolutely insignificant number of the world's five billion internet users (this goes for all other chains and L2+ that can be analyzed).
I don't get it.
Maybe the problem is that you lack an understanding of what money should be and what problems banking and fiat have?
Tax evasion, money laundering, trafficking, drugs, sanctions evasion etc.
Since the introduction of KYC it's very hard to do any of these in the traditional finance system. And each of them has very serious implications for people's lives.
Those are even better money laundering tools than Bitcoin.
How are cash and art better for money laundering than Bitcoin?
Money spent to buy the art is clean in one shot because art is worth whatever someone pays for it and it is hard for an investigator to prove you didn't simply -really- want that particular painting. Someone showing up to a bitcoin exchange with $1m in BTC trying to convert it to cash is going to invite law enforcement questions about the source of those funds really fast.
Art remains one of the most effective money laundering and tax evasion tools.
I have friends that have fled war torn countries, dictatorships, etc and I'm glad blockchain now exists for that scenario but again - can that use case (fortunately very rare) justify tens if not hundreds of billions of dollars of investment and over 10 years of work?
This is what I don't understand.
I understand banking has problems (fiat is a much longer debate). What needs to be understood is how many of the 5 billion internet users think the benefit of blockchain justifies throwing out the entire financial (and often legal) system and operating in a parallel one? Not to mention the willingness of average people to essentially be their own bank. For this reason alone I think blockchain is a non-starter for the overwhelming majority of internet users.
How many people care? Answer is: a tiny portion. A very optimistic estimate of total blockchain "users" worldwide is in the range of 100m. 13 years and untold billions of dollars of investment to reach 2% adoption of the internet population isn't exactly a success story that speaks well to the utility of the solutions provided and the real world problems they solve.
I don't believe people are capable of grasping the nature of money. Money is supposed to be a medium of exchange yet everyone wants to turn it into a forced store of value with no consent, that is basically the equivalent of slavery.
Similarly, no one will ever say "WOW I need blockchain in my life right now" but they might say "WOW I need to send some money" or "WOW some of my friends are making their money work for them maybe I too should do some speculating" or "WOW I distrust the government's control over the financial system" and blockchain will occasionally prove to scratch that itch.
I sure did, and I wasn't alone. I remember thinking the existing search engines were trash long before google came around. The market was starving for a search engine that was user-focused and not 200% bought and paid for by marketers.
"WOW I need to send some money". Enter: PayPal, Venmo, Trust Wise, and any number of others.
There are plenty of ways to gamble and speculate without touching blockchain if that's your thing. What's amazing is even a mafia bookie or the shadiest of casinos won't pull a Celsius on you.
Don't trust the government? With blockchain you're expected to completely trust yourself and any number of shady characters in the blockchain space. Clicked the wrong link and your wallet got hacked? Sorry. Forget your seed/passphrase? Sorry. Some defi exchange with a buggy smart contract (as if there are any that don't have bugs)? Sorry. Picked the wrong exchange and the people behind it faked their own death and disappeared with your money? Sorry. The list goes on and on.
Other than the absolute worst and shadiest governments in the world do you trust these factors and actors more? Does anyone else?
Let's be clear: when Google exploded, that was the growth of the Internet in the driver's seat, not demand for Google specifically. Google's growth was a side effect of the exponential growth of the internet because it solved a need where there was no adequate incumbent solution, and where demand for that solution was growing exponentially for reasons basically unrelated to the quality of the solution.
This isn't the case for crypto, because there's an incumbent solution that works fine. More specifically, in our analogy, money is the counterpart of the Internet. Crypto is in the position of needing to slowly sap market share from an incumbent (government fiat) in the same way that, for example, DuckDuckGo does even if you feel it's a superior product.
If Bitcoin was the first-ever instance of money, I assure you its growth profile would look like Google's did.
DAOs, NFTs, smart contracts, random tokens all seem less like good features and more like transparent scams or terrible ideas that don't work. It's fine if adoption is slow - but there should actually be something beyond Ponzi schemers and hackers stealing from each other. Drugs and tax evasion, sure, but how far does that take you?
What people are selling as far as DAOs, NFTs, and "smart contracts" where they mean are better and more sophisticated than Bitcoin, can all be favorably described as the application of Bitcoin's critique of money to the issuance and governance of other tokens representing other forms of property, and are inherently more complex. Least favorably described, they are scams to boost leverage powered attacks. The middle of the road might be that they're the naive notion that building more complex constructs on top of what Bitcoin defined is immediately achievable without compromising invariants that matter for useful money.
All to say that the "killer app" critique of Bitcoin probably ins't the best lens, and that if it's more complicated than custody and payments, especially for people where that isn't readily available, it's probably further out than is survivable for a single company requiring the kind of trajectory of those that create "apps".
Bitcoin is basically a kind of musical chairs for money. People buy in and try to get out and maybe they make money and maybe they lose money. People will play this game, clearly, but that doesn't mean Bitcoin is the future of money anymore than casino chips are the future of money.
Medium of exchange or rather the division of labor. Bitcoin doesn't do it. In fact, most people who like Bitcoin want it to be a terrible medium of exchange. Everytime you hear people talk about Bitcoin on Reddit there are HODL memes, aka people openly proclaim that they don't want to use the money for anything other than speculating that it goes up in value.
They're not speculating that it will go up for no reason. The investment thesis is that it solves real world problems, and that everyone who thinks it doesn't sounds like someone comparing fax machines to the internet in the 90s.
Why (and when) will average users suddenly care "because blockchain"? They don't and won't (the usage numbers reflect this). They just want to get an answer to a question in seconds, Tweet their musings, endlessly scroll pictures on Facebook/Instagram/etc, or watch Youtube videos of cats, glitter bombs, or whatever. For free. As ridiculous as it is to me and most of HN the average person is even willing to have their TV and streaming services show them endless ads. They just like that they bought that 60" TV for $400 on Black Friday.
Even the censorship/de-platforming argument falls flat. It's been demonstrated that people (as a whole), going back to our tribal roots, prefer to engage with like-minded others. It is fundamental human nature and there have been multiple studies conducted that show it's wired in to our reward circuitry.
Trump gets booted off Twitter? Enter Truth, Parler, whatever where many millions of users moved in near record time. When it comes down to it people like echo chambers and they like free. Platform for free speech? Create a Truth account and start wandering in to flame wars that go against the political leanings there. You will get booted just as Trump got booted from Twitter.
This is where I think blockchain and lack of censorship is also fundamentally flawed. They don't want to pay XYZ in some random coin to make a social media post. They also don't want to bump in to child pornography or some other universally objectionable content (in the case of true to the mantra decentralized blockchain platforms without any form of "censorship").
The same argument goes for money. Almost no one cares - they want to swipe their credit card a few times a day and move on with their lives. They do not care about transaction fees, final settlement times, etc. It's invisible. Other than credit cards and cash the average person interacts with more complicated levels of the financial and banking systems a few times in their lives. They do not care if a lifetime of home ownership (as one example) cost them $50 in wire fees. They likely have no idea (and again don't care) how the 401(k) their employer set them up with actually works.
They also don't want to discover that their wallet has been hacked, their exchange collapsed, the value of their money dropped 20% overnight, or any of the other number of ways funds go "poof" with blockchain.
Also, Bitcoin threatens the status quo in a massive way. Not only private businesses like banks but also powerful entities like governments and intergovernmental organizations.
Needless to say, I don't expect adoption to be comparable to that of a web search engine.
For actual products bitcoin (and blockchains like Ethereum with EVM) are the fundamental enabling layer. I like to think of them somewhat akin to TCP/IP or even HTTP. Where are the higher layer applications and use cases built on blockchain with instant and obvious utility to the average person walking down the street? This is what I was getting at with the decade plus of development and billions of dollars of investment.
The internet was a fundamental threat to all kinds of institutions - governments with censorship, big media (including state run), and even financial institutions. The internet provided instant untold value for democracy and free speech. Just widespread and instantly available encryption itself was a HUGE problem and threat to governments, law enforcement, militaries, intelligence agencies, etc. Remember the Clipper Chip "debate" and 40 bit encryption export controls? I do.
Yet the obvious value and utility was so clear even governments like China (with the Great Firewall) knew it was of such incredible value to the economy and clamored for by the citizenry they figured out a way to make it work within their system of government. Inside of a decade billions of people were using the internet to further democracy, free speech, and the dissemination of information.
Then why have almost all authoritarian governments banned Bitcoin?
> If you can enforce the currency you can enforce wealth inequality and entrenchment of incumbents.
That's the whole point. No one can control Bitcoin which is why it's not appealing to authoritarians. Authoritarians don't like things they can't have authority over.
Showing authoritarian governments don’t like Bitcoin doesn’t help. Western conservatives and CCP’s social views are very similar. Yet they despise one another. Of course. Authoritarians want to be the ones in control. Why would they like other authoritarians?
Second, "Bitcoin being high value to authoritarians" is another way of saying that authoritarians like Bitcoin. There's a lot of evidence that they don't, and for good reason: they can't control it.
The opposite of authoritarianism is anarchism. Anarchism and libertarians are not the same thing. One is hard left, the other is hard right. They can’t both be the opposite of authoritarianism.
Libertarians want to be the ones in power. Being in power is something authoritarians enjoy too. I already responded to the authoritarians not liking something does not mean anything about their principles or beliefs.
But you still have distributed authorities, the owners of Bitcoin. The idea that one should be controlled by the interests of financial capital is anthitetical to free speech, freedom and self determination.
>Also, Bitcoin threatens the status quo in a massive way. Not only private businesses like banks but also powerful entities like governments and intergovernmental organizations.
It doesn't, it entrenches the status quo. That is quite literally what deflation is, a reward for people who dominated the economy in the past.
What does that mean? That's not how Bitcoin works. There are no distributed authorities. Even miners don't have authority over Bitcoin, other than deciding the order in which transactions get confirmed.
> It doesn't, it entrenches the status quo. That is quite literally what deflation is, a reward for people who dominated the economy in the past.
Even if this was true in a world where Bitcoin is the dominant currency[0], it is not true in the world we live in today. In the world, we live today, governments, corporations, and wealthy individuals are all heavily invested in fiat[1]. I wasn't making the argument that Bitcoin is morally desirable because it disrupts the status quo. I was making the argument that because Bitcoin disrupts the status quo, it will get significant push-back from the powerful entities which have an interest in preserving the status quo.
[0] Apple alone has 200$ billion in fiat, just to give an example.
[1] It's not as if fiat monetary inflation goes directly into the hands of the poor. There's a lot of evidence that the opposite happens and that it actually increases wealth inequality: https://wtfhappenedin1971.com/
They also tend to last forever once established: see e-mail.
Some orgs still self host.
Choice is what matters.
> Google went from a research project to incorporated and usable on the internet in roughly two years
I don't think this is a fair comparison. Google is a late bloomer, being preceded by lukewarm online services AltaVista, Yahoo!, and AOL. Just like how Facebook became successful when MySpace did not, the latecomer can have a substantial advantage in speed and scale.
Moreover, Google is an application. The Internet is a platform. Google was founded several decades after the Internet. The first few decades of the Internet were clunky, slow, and expensive.
I would compare Bitcoin to the Internet. It is the raw, unsightly engine room that most people should not directly tinker with. Where are the killer applications that will run on top of Bitcoin? We're still figuring that out.
I don’t see why Bitcoin should be compared to the internet and why Google’s timeline should be compared to the internet vs world wide web.
Companies use proxy countries to bypass sanctions all the time. You know how they're caught? Financial audits.
> change the fact that circumventing agricultural import laws is a massive crime
I'm not sure how people so easily forget that it was a massive crime to protect jews from being murdered. That same thing still happens today with various minority groups around the world.
If you pay attention to non-developed world problems, you become painfully aware that bypassing laws that are a "massive crime" is extremely important for solving some of the worst problems in humanity today.
Government will adapt and just ban shipping vessels from visiting sanctioned countries, or create a vast make work agency to inspect cargo on ships that visited sanctioned countries.
As for why everyone isn't using bitcoin to bypass? Good question.
We are scaling BTC like the internet, in layers..
Those layers are different levels of abstraction that actually sit on top of one another, but encompass the lower layers.
e.g. HTTP, SMTP, POP3, etc., all sit on top of TCP — that is to say: all of those protocols actually use TCP, they are TCP, they are all made from TCP packets/communications.
TCP sits on top of IP, that is to say: all TCP packets are in fact IP packets.
They are layers of abstraction, and each layer of abstraction is not just 'related' to the lower layer(s), or 'referencing' the lower layer(s) once in a while, each of those upper layers is in fact an instance of the lower layer.
At the bottom, it's all IP. The higher layers aren't substitutes for IP that get turned into IP when necessary, they are all IP.
If your comparison was valid, then protocols such as e.g. HTTP wouldn't actually be valid TCP packets and valid IP packets, instead HTTP would be completely separate to the lower levels it is built upon, and at some point it would be converted back and forth to the other protocols. Which is not what happens.
If your comparison was valid, then all L2 cryptotoken transactions would actually simultaneously /be/ blockchain transactions — and not just written back to it periodically.
Edit:
Here's an analogy: it's like IP protocol is letters, those letters can be grouped into words, which is the next layer up, e.g. TCP, UDP, etc., and those words can be grouped into sentences, which are like the higher level protocols, such as HTTP, SMTP, POP3, etc.
Granted, the OSI model also includes lower levels, and I'm only discussing three higher layers, but the principle is the same. The higher levels /encompass/ the lower ones, they are actually built /with/ or /from/ the lower-level components. This isn't how Lighting works. It's a separate distinct network to the main blockchain, and it then writes back to blockchain.
And you can't apply your same logic to it bc of lack of understanding.
To be quite frank, based upon the fact you think the layers of OSI and TCP/IP are to help it scale, you clearly appear to have little (or no) understanding as to how that actually works — so your direct comparison to LN scaling here isn't just weak, it's meaningless and just plain factually wrong. And this is particularly obvious to folk who /do/ actually understand both.
— Good day to you, your bad logic and your poor argument.
"A really vicious critique of the misguided ISO networking standards attempt, written when the 'OSI model' was trendy & lots of people were babbling about the sacred seven layers."
https://news.ycombinator.com/item?id=19866389
Pfff, TCP/IP will never succeed. It doesn't have enough layers! /s
https://archive.org/details/elementsofnetwor00padl
"The Book": The Elements of Networking Style: And Other Essays & Animadversions of the Art of Intercomputer Networking, by M. A. Padlipsky (1985)
The World's Only Know Constructively Snotty Computer Science Book: historically, its polemics for TCP/IP and against the international standardsmongers' "OSI" helped the Internet happen; currently, its principles of technoaesthetic criticism are still eminently applicable to the States of most (probably all) technical Arts-all this and Cover Cartoons, too but it's not for those who can't deal with real sentences.
Standards: Threat or Menace, p. 193
A final preliminary: Because ISORM is more widely touted than TCP/IP, and hence the clearer present danger, it seems only fair that it should be the target of the nastier of the questions. This is in the spirit of our title, for in my humble but dogmatic opinion even a good proposed Standard is a prima facie threat to further advance in the state of the art, but a sufficiently flawed standard is a menace even to maintaining the art in its present state, so if the ISORM school is wrong and isn't exposed the consequences could be extremely unfortunate. At least, the threat / menace paradigm applies, I submit in all seriousness, to protocol standards; that is, I wouldn't think of being gratuitously snotty to the developers of physical standards -- I like to be able to use the same cap to reclose sodapop bottles and beer bottles (though I suspect somebody as it were screwed up when it came to those damn "twist off" caps) -- but I find it difficult to be civil to advocates of "final," "ultimate" standards when they're dealing with logical constructs rather than physical ones. After all, as I understand it, a fundamental property of the stored program computer is its ability to be reprogrammed. Yes, I understand that to do so costs money and yes, I've heard of ROM, and no I'm not saying that I insist on some idealistic notion of optimality, but definitely I don't think it makes much sense to keep trudging to an outhouse if I can get indoor plumbing . . . even if the moon in the door is exactly like the one in my neighbor's.
Appendix 3, The Self-Framed Slogans Suitable for Mounting
https://donhopkins.com/home/Layers.png
IF YOU KNOW WHAT YOU'RE DOING,
THREE LAYERS IS ENOUGH;
IF YOU DON'T,
EVEN SEVENTEEN LEVELS WON'T HELP
On the occasion of The Book's reissuance, Peter Salus wrote a review in Cisco's Internet Protocol Journal which included the following observations:
Padlipsky brought together several strands that managed to result in the perfect chord for me over 15 years ago. I reread this slim volume (made up of a Foreword, 11 chapters (each a separate arrow from Padlipsky's quiver) and three appendixes (made up of half a dozen darts of various lengths and a sheaf of cartoons and slogans) several months ago, and have concluded that it is as acerbic and as important now as it was 15 years ago. [Emphasis added] The instruments Padlipsky employs are a sharp wit (and a deep admiration for François Marie Arouet), a sincere detestation for the ISO Reference Model, a deep knowledge of the Advanced Research Projects Agency Network (ARPANET)/Internet, and wide reading in classic science fiction.
In a lighter vein, The Book has been called "... beyond doubt the funniest technical book ever written."
You will get no argument from me on that
There isn't a crime in the world that can't be stopped in more appropriate ways than giving an authority presence the ability to stop me or anyone else from spending resources that they own. Nowhere on the list of top crimes against humanity have there been situations where it would've been better if centralized powers had more authority.
Authority is a fundamental and underlying requirement of essentially all aspects of civil society, including but not limited to justice. There is actually no way to define even the concept of crime without an appeal to a supervisory authority.
Authority, and specifically "centralized" authority, is a necessary component of any system that can effectively serve more than a nominal quantity of human beings.
It would seem bitcoin, a global, massively successful cryptocurrency with no centralized authority, serving as a sovereign nations national currency, serving markets all over the world to the order of trillions of dollars would be one of many direct contradictions to your claim.
Currency had an actual definition, expressed in terms of other actual things. It's not just whatever you say it is, or whatever someone might use to perform an economic activity.
Additionally, Bitcoin is plainly not "massive successful". It is at best "marginally utilized".
Truth is crypto enthusiasts have been overly ambition in this space, insisting a single L1 chain will come along and be the solution.
The average user A) Doesn't care and B) needs a higher level transaction layer that is flexible, where charges can be reversed or funds restored in the presence of theft or fraud. That stuff happens all the time in real life.
There is no way to improve the blockchain as currency UX without a centralized mediator(s) for average people. People get scammed all the time despite there being dozens of safety nets in place. How is that going to work when an attacker just needs your crypto keys to steal your entire net worth?
Now do all the above using Bitcoin/lightning network. You'll be done in 15 mins.
[0] Money transmission is the act of receiving currency from one party and transferring it to another party. Basically, middlemen in a transaction (e.g. banks).
[0] https://www.coindesk.com/policy/2014/01/31/fincen-declares-b...
You can buy a prepaid Visa with cash in just a few minutes.
Doesn't it require having a U.S. corporation? That's a few hundred dollars off the bat. It also requires you to provide evidence that you are within the types of businesses they authorize. I also suppose it requires having a bank account. Opening a business bank account does not take a few minutes and it can be close to impossible for certain categories of businesses. Multiply that by 10 if you are not a citizen/resident. I also don't believe Stripe allows sending money. Furthermore, receiving payments on Stripe effectively takes a week due to the waiting period. Finally, if Stripe decides to freeze or terminate your account, you are f'ed.
That said, Bitcoin is still a whole lot easier to accept, and on the L1 level can't be blocked by anybody. Cryptocurrency is definitely the future, but traditional banking is trying to compete sometimes :-)
[1]: https://e-resident.gov.ee/ [2]: https://wise.com/
PayPal etc don’t require any business stuff. Being a traditional bank is unimportant for getting paid for online stuff.
There’s a lot of ways to get access to something that qualifies as a bank account. For example, Cash App got big because it provides what a bank account does and qualifies as one, even if it is not a traditional bank at all.
Once multiple apps are available worldwide as well as multiple ways to have a bank account or a bank account equivalent, why would cryptocurrency be the future?
Multiple apps are already available for the majority of the population. The west, India, and China alone are close to half the world population.
In the west, opening a business bank account does indeed take a few minutes. There’s more than enough that allow opening one online.
It isn’t needed for Stripe or many payment providers, so it’s a moot point. Same with many payment providers not requiring a business.
References: - https://support.stripe.com/questions/selling-on-stripe-witho... - https://www.statrys.com/blog/connect-stripe-bank
In Russia, it is a bit easier than running an LLC, so many entrepreneurs choose to start as an SP. In Estonia I've seen zero sole proprietors – the burden is the same, but LLC taxes are more favourable (0% income tax until you pay out dividiends) and limited liability (which you don't get as an SP).
[1]: https://en.wikipedia.org/wiki/Sole_proprietorship#United_Sta...
I don’t expect you to know the answers to these questions, but the focus was on the difference between Bitcoin and Stripe/PayPal, etc. The thing I replied to specifically said there was an onus of several hundred dollars which I was disputing as well and which is not correct for the US.
In Russia, they aren't if it's systematic [1] (and if you get caught, which is usually not a concern for many unregistered one-man businesses). Stripe isn't available in Russia but most local payment gateways check your paperwork thoroughly, so if you're not a registered SP, card payments are mostly off the limits and the main payment method is card to card transfer there. (There's a few options, but those aren't widely popular because who cares)
[1]: https://www.consultant.ru/document/cons_doc_LAW_10699/cc12ef... article 171 of the criminal offence code (in Russian)
I don't really have any experience with SPs in Estonia, but I think it's pretty similar. Let me try and sign up for Stripe and see what happens :-)
Update: I've just signed up as a “sole proprietor” and charged myself 1 EUR. I've only had to fill in my name and home address. Not even I had to submit any documents, perhaps because I already have an LLC registered with Stripe. Still not sure if it's legal, but from the technical standpoint yeah, you probably can use Stripe without any paperwork here in Europe.
Compared to... 1 dollar, no, 15 dollars, no, 5 dollars, no, 65 dollars, no, ... transaction fees for Bitcoin.
And of course there other payment systems around the world that don't rely on card transactions.
And don't forget that the entire lightning thing is dependent on banks aka nodes with large sums of money to provide liquidity in the system.
Each problem that's dismissed out of hand by crypto proponents is compounded by the endless streams of bigger and worse problems.
How is building a competing chain to more efficiently solve a problem (high transaction fees) in a competitive market in any way "dismissing" that problem? That seems the exact opposite of dismissing a problem.
Do those new solutions come with new problems? Sure, that's true of any technology. Dynamo-based databases solved high availability and network partitionability of data but come with several trade-offs. That doesn't mean you shouldn't use Cassandra for anything.
That said, Solana is not the hill I'm willing to die on and it's hot garbage. Hedera seems good though.
- decentralised
- trustless
- censure resistance
Edit: - pseudonymous
- 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?
— Satoshi, 2009-02-11 https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/...
> pseudonymous: why do I want anyone to be able to see my transaction history?
Transactions are viewable in the blockchain so that every party involved can audit the system and confirm the issuance.
Yes. Because society is built in trust. Something crypto world is busy rediscovering.
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.
Surely this is a joke? Most currencies enjoy a high degree of trust until they collapse due to structural reasons that have nothing to do with trust whatsoever.
The euro zone and the dollar show that there is practically no shortage of trust whatsoever.
Seriously, this dude is supposed to liberate us from the evils of money?
How did it come to this? The root problem with currency is the zero lower bound of interest and liquidity preference which both combined result in permanently positive interest rates. When you refuse to pay interest, the economy stagnates and it can result in mass unemployment. This has nothing to do with trust. The Bitcoin economy is plagued with mass unemployment. The insanity of unemployment is a consequence of the insanity of non neutral money. Alternatively, you can pay interest, however this means you must perpetually borrow more money, e.g. Keynesian fiscal stimulus, notice that the insanity originates in money itself, not in the political response, the political response must be at least as insane as the money system, no less and it collapses. Now, there is a third way, QE aka not bothering to ask people whether they want to lend their money out, however, due to liquidity preference, the additionally created money will stagnate somewhere, meaning you can't ever stop QE. Again, in this case the insanity is a structural property of the currency, the monetary intervention has to be as insane as the money system and no less.
The apparent untrustworthiness of politicians is the result of the insanity of money, not the other way around. If money worked properly, you wouldn't need politicians to mess with it, you wouldn't even consider trust to be the problem because the amount needed would be so miniscule as to never matter in the grand scheme of things.
It is really strange to me, that people notice a constant problem with money and yet they still come up with the same conclusion "you're holding it wrong", what if it is impossible to hold it properly? What if permanent money is irreparably broken and forces its own debasement and all the other problems?
Imagine a world where the web is controlled by a single entity, say Facebook. They get to decide who is allowed to create a website. They get to decide how much it cost. If they're not happy with the site's content, they can take it offline. Do you believe that would be a better world to live in?
- trustless: I trust the companies I use, it works
That's because there's usually no alternative. But when there's a trustless alternative, you may find that it is less risky or costly. Many people chose e2e encrypted messengers because they don't trust a third party with their private messages.
- censure resistance: OK, fringe case for most
"[...] Then they came for me—and there was no one left to speak for me."
It may be fringe but it's a massive issue for those who are censored. It's also not that uncommon. It is estimated that there are over 1 billion unbanked people worldwide. Also, try "PayPal horror stories" on Google.
- pseudonymous: why do I want anyone to be able to see my transaction history?
What parent meant is you can transact with people without knowing their real identity. I could send you a BTC tip on HN without knowing your name or address. Regarding your concern about privacy, no one can really determine your transaction history by looking at the blockchain. It's possible to do some guessing but all you really see are transactions going from opaque addresses to other opaque addresses with no attached identity information. Also, this can be further solved with CoinJoin[0].
Private messages are not money. Example: you ordered some goods and those arrived in bad shape. What's your recourse in the trustless world?
There is no trustless world, just a world where trustless is an option and where "trustful" systems can be built on trustless foundations.
[0] Those systems give some guarantees about the trusted party (e.g. that they can't just run with the money).
You cannot build trust on a trustless foundation. As, again, the crypto world is busy rediscovering.
What exactly does Bitcoin provide in this case?
> this is what I meant by building "trustful" systems being built on top of trustless foundations
So, a service that exists outside bitcoin, has a trust system built entirely outside bitcoin and only doing something with bitcoin because reasons... is "building trustful systems on top of trustless systems".
I don't think you know what "building on top" means.
Edit: grammar and mobile typos
There are many centralized services that do dispute arbitration on top of USD. Those systems are built entirely outside of USD. PayPal for example doesn't have an account at the Federal reserve nor does it handle physical cash. They are effectively "off-chain" payment systems for USD.
So I guess your question is, what are the advantages of BTC over a fiat currency like USD. The answer is two folds:
1) BTC has an open network (the Bitcoin blockchain) allowing users to exit payment systems for the purpose of self-custody or for interconnecting with other payment systems. There's no equivalent system with fiat. Self-custody of USD literally requires transporting and storing pieces of paper. You also can't directly transfer USD from PayPal to say, CashApp.
2) BTC has a predictable money supply. Fiat currency doesn't: money supply can be arbitrarily inflated.
In addition to the above, Bitcoin enables the creation of payment systems that are more tightly built on top of it, like the Lightning network, which preserves many of the properties of Bitcoin (e.g. trustless). You could also build a dispute arbitration system where the arbiter just needs to be semi-trusted (e.g. there are schemes that can cryptographically prevent the arbiter from stealing escrowed funds, etc.).
We are talking bout fiat? No.
> So I guess your question is, what are the advantages of BTC over a fiat currency like USD.
No. The question is: what does the trustless blockchain offer when you still have to rely on a centralised trusted entity.
> BTC has a predictable money supply. Fiat currency doesn't: money supply can be arbitrarily inflated.
Which immediately means that whoever got in early and got the first initial supply is at great advantage compared to anyone who got in later. For example compared to any people born 20 years from now.
> You could also build a dispute
Could. Maybe. Should. Perhaps. That's all you can ever hear from crypto proponents.
I was asking about fiat because many of your criticisms equally apply to fiat.
> No. The question is: what does the trustless blockchain offer when you still have to rely on a centralised trusted entity.
I answered that multiple times already.
> Which immediately means that whoever got in early and got the first initial supply is at great advantage compared to anyone who got in later. For example compared to any people born 20 years from now.
That's, unfortunately, the case for almost anything of value.
> Could. Maybe. Should. Perhaps. That's all you can ever hear from crypto proponents.
I'm not sure I would consider myself a crypto proponent, I was trying my best to answer your questions as objectively as possible.
But it seems you are very emotionally invested in this for some reason... Did you have a bad experience with crypto?
They... don't.
> I answered that multiple times already.
You haven't. All you're saying "o let's have this centralised trusted entity that does something with blockchain because blockchain".
> That's, unfortunately, the case for almost anything of value.
If bitcoin is a currency as you would have us believe, then this is not what a currency should be.
> But it seems you are very emotionally invested in this for some reason...
Ah yes. There are only a few ways crypto discussions go: problems are dismissed out of hand and/or "have you had bad experience with crypto" (often in the form "you're just sad that you didn't get in on it early").
My question to you: what is your alternative? USD has many of the problems you mentioned and more. Transactions happen "off-chain", monetary inflation largely benefits the wealthy, etc.
They already said fiat doesn’t have close to the same issues as crypto. The monetary inflation benefits to the wealthy are nowhere near the same for Bitcoin or any crypto. It’s a fraction of how bad Bitcoin is. They also basically said that multiple times too.
They have answered the rest too. Being on chain isn’t an issue for fiat because they aren’t trying to be on chain. They aren’t trying to shoehorn in blockchain.
Yes the last line is a recurring one lol.
There is no central authority in LN. There may be "hubs" which are more or less important, but that's not centralisation because there are several of them, it can also work without them, and also they can't steal your money.
Would you say that email is centralised because there area few big server (Gmail, Microsoft)? But even if it may more convenient to use one of the big server, you still have the choice not to use them.
The incentive structure of Lightning to me seems to heavily incentivize the formation of a few centralized nodes affiliated with wallet providers – a structure which would forfeit many, if not all, of these properties.
Yes, being able to settle across currencies pretty efficiently is nice, but the real value is just what you mention: Dispute arbitration and managing liability in case of fraud.
Could you tell us what L1, L2, L3, L4 are in a credit card example?
L1: Central bank (implements monetary policy)
L2: Member banks (have accounts at the central bank)
L3: Non-member banks
L4: Clearing house, SWIFT, etc. for interbank payments
L5: Credit card networks
Did you know that fiat doesn't even have a blockchain to withdraw to when you want to exit or switch payment network/provider?[0] Did you know that with fiat, the money supply can be changed arbitrarily?
Those are problems that Bitcoin still solves when you use an off-chain transaction network (at least for the many people who believe those are problems worth solving). Also, it's worth noting that the Lightning network is hardly centralized. It's a bit more centralized than Bitcoin but we're light years away from say, Paypal.
[0] The closest that comes to this is SWIFT, but it's not an open network. Even large payment systems like Paypal aren't connected to it. It's also not censorship resistant and you can't use it p2p.
It depends on a blockchain?
[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.
Edge cases are not mass deployment use cases
There aren't many use cases for the "average Joe" for now. It's still the early days and not many merchants support it. So if you aren't particularly interested in the technology/philosophy nor have a use case for it, there's probably no compelling reason for you to use it. Right now, it is of most utility to unbanked/underbanked people, for remittances, and p2p payments. It is also used for payments by merchants but only in some niches (e.g. online porn, gambling, cannabis industry, etc.).
Of course, it's also appealing to speculators who believe in its long-term potential. They are probably the largest class of Bitcoin holders, but Lightning doesn't really target that use case.
Let me tell you a little story. A boy creates wealth, the government creates money in proportion to the wealth. The alternative is to succumb to incumbents, the wealthy, the aristocracy and ask them for permission whether you are allowed to create the wealth or not.
It is a weird line in the sand to me that something must either happen on a blockchain or not be the right solution, pretty much regardless of whether that blockchain's finality guarantees are worse if understood at all.
>The development of the Lightning Network may have consequences for welfare. First, as Bitcoin becomes a more efficient payments system, users are better off. Their transactions settle more quickly and more cheaply (Zimmerman (2020)). Second, since fewer transactions need to be recorded on the blockchain, less memory and energy are needed to run a Bitcoin node. This saving lowers the cost of maintaining the blockchain, allowing more nodes to participate and making the system more secure against a double-spending attack (Budish (2018)). Third, by reducing fees, the LN reduces the incentive for Bitcoin miners to use large amounts of computing power, meaning less energy use and positive consequences for the environment.5 Fourth, less blockchain congestion may mean lower barriers to arbitrage across cryptocurrency exchanges, thereby improving market liquidity (see Hautsch, Scheuch, and Voigt (2018)).
>While this paper focuses on Bitcoin, the same technology can allow other cryptocurrencies to be widely used, secure, and decentralized. For example, the Raiden Network is a similar netting solution for Ethereum. Other solutions to the scalability problem have been proposed, including sharding, and batching at exchange level.6 If the scalability problem can be successfully addressed, it may be possible for a currency based on a permissionless blockchain to obtain wide acceptance.
very cool to see this coming from the Federal Reserve Bank of Cleveland
That's great for the environment, but in the long term of vanishing block subsidies, not so great for Bitcoin's security, as the costs of 51% or censorship attacks also decrease.
So, LN does not reduce the incentive for Bitcoin miners in any meaningful way, unless I'm mistaken.
The vast majority of energy consumed by the bitcoin network is in mining, and that's not impacted by any of this.
I don't think that's actually true. Mining earns money through transaction fees and the mining block reward.
The block reward is directly set by an algorithm which lowers the amount over time. Transaction volume is totally irrelevant.
Miners and users set the transaction fee by choosing what they'll accept, so it should respond directly to supply and demand. If the Jevons Paradox [1] holds, making transactions cheaper means that there will be more of them, so even though on-chain Bitcoin transactions now account for less than 100% of transactions denominated in BTC, that doesn't necessarily mean that there will be fewer total on-chain Bitcoin transactions. So transaction fees paid to miners might not actually go down, either.
So in contrast to a fiat bank, where you keep your funds permanently, you could use a "lightning bank" just to hold last nights payments and transfer them to yourself every morning. Or you automate the withdrawl to take place every hour.
And: Couldn't your phone be your server? The way I understand LN, receiving funds just means to exchange a few bytes of data. Can't phone apps receive push messages?
Receiver of funds are normally merchants, and merchants normally already have payment systems that require some kind of connection anyway.
like Chivo? take out the middleman(Banks) and put governments back in control of the funds.
bingo :)
Think about it...
Imagine if you could have complete custodial access, control and oversight of the details of your citizens financial info? No bank accounts, no stash of gold. It all through the US-backed custodial wallet "Trump's Coin purse". Everyone download it now and get $30 free! Also, it's a requirement for all employeers now so, deal with it banks.
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.
At its peak, there was only $200 million worth of BTC as collateral in LN channels:
https://www.defipulse.com/address-tag/lightning-network
This is against an ATH market cap of $1.25 trillion. LN collateral isn't even a rounding error relative to outstanding BTC.
The much more likely explanation for reduced congestion is that people stopped using BTC as money, as major merchants like Expedia, Microsoft and Steam stopped accepting it.
Expedia, Steam and Microsoft not a likely reason cobnest ion got lowered. More likely exchanges and large players got better at handling their wallets.
The collateral in these channels is therefore a fair proxy for the overall size and usage of the LN.
BTC as a store of value can have a very low volume and those LN could be responsible for an inordinant amount of volume, with low collateral depending on how fast the trades are.
With OTC, Wrapped versions, and leverage through sythetix its also an impossible task to be able to claim for certainty anyways.
Theoretically yes, in practice no.
Routing complexity increases as usage increases without a commensurate increase in channel collateral, because increased usage leads to more channels using up the collateral for one direction of transmissions, which eliminates the transmissibility of one of the two routes in the channel. The network would thus naturally see rising collateral - either in existing channels or in new ones - to maintain routing efficiency, as usage increases.
Beyond that, more individuals joining the LN would naturally lead to more collateral being added to it, as individuals create new channels with new stashes of respective collateral.
For these reasons, low collateral reliably maps to low usage.
...?
1.) I have a direct disincentive to include more collateral than would be absolutely required.
2.) Most of the time LN's only need to go one way.
3.) The only thing your original graph shows is that the price of bitcoin has fallen.
4.) I anecedotely know there has been more use in LN among all my crypto friends and in South/ central America where i have seen increased use in Cafe's and hotels.
5.) The total amount of BTC being used as collateral in LN has grown. (Even though this means absolutely nothing and your graph of 'TVL' Also means nothing when compared is USD).
6.) It's annoying to see someone spitting FUD on BTC/ LN with ETH in their name.
2. LN transactions going one way makes the collateral situation worse, by preventing collateral from being replenished by counter-flow transactions.
3. It shows how little value is locked in LN channels relative to value of BTC outstanding.
The rest of your points are either not relevant or have already been addressed.
Even opening a channel for everyone in Bay Area requires the better part of a full month of the entire chain capacity's.
It also has roughly speaking none of the guarantees of Bitcoin, and could really be used with any underlying asset.
The only scaling solution is MySQL, just like the Bastion of Bitcoin, El Salvador is doing. Always was.
Can we move on already?
Likewise, not everyone needs to create their own Visa or MasterCard. They may have their MySQL/PostgreSQL implementation where they scale and allow for many TX/s. But they don't settle all these transactions in real time. That's also done on a different, slower layer.
It's not a real solution. It's something coiners distract people with whenever someone points out the obvious and glaring flaws of the L1.
[edit] To me it's pretty telling that critics offer specific quantifications (X people requires Y time) and proponents say "only some people need it!" - how many, exactly? How full do you anticipate blocks being with other things? How long is too long to open a channel? Currently it sounds like a Soviet phone line - better put in a request now otherwise you might be in your 80s before it gets installed.
That ended in 1971 by the way, when Nixon ended the gold standard for the US dollar because the government needed money to pay for the war in Vietnam.
It's just popular to ascribe this to Nixon because you know, Nixon bad. Watergate, etc. But not everything a bad leader does is bad - Nixon gave us the EPA too. Stopped rivers catching on fire and everything.
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.
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.
We haven’t even started to talk about QE which is actually why the Fed and TARP bailouts (aka investments) ended up being profitable. There are a huge number of losers from 2008 which can’t be seen from a superficial surface view, instead it requires playing out an alternate reality where liquidations were forced, and that is a complex and difficult discussion. Paulson was a brilliant spin doctor and so successful that his fake stories of hundreds of thousands of jobs saved and ATMs that didn’t run out of money is being taken as real history, instead of the evil deceptive game it was to insure all his people continued to dominate global finance. It would take a long discussion to try and explain to you how profoundly unethical and manipulative were the actions they took and the effects those actions still have today in terms of extreme inequality, caused not by capitalism itself, but this crony capitalism.
Bitcoin was born from this reality and highly motivated by it. For a certain generation of finance technologists who had a close view of the inner workings of the system it was obviously rotten and corrupt to the core. The core being fiat.
If you are trying to pretend that by explaining M1 and M3 and the creation of money supply you claim somehow USD is “federated” and not centralized then in my opinion you don’t actually understand what you think you do.
Maybe read up on the Fed window and QE mechanisms and their balance sheet. USD is centralized with Fedwire, OCC, Treasury, Swift, BIS and all their regulatory operations, so they have very good information on most digital dollars in existence and certainly have incredible control over their creation and destruction.
Bitcoin is likely here to stay and in my personal experience most people who hate on it were once believers who bought high then sold low after one of its crashes. they now how a very bitter taste and have decided there is some fundamental flaw with it as an idea, mostly motivated by their own emotions and not logic. the other haters tend to have some deranged love of governments and see it correctly as a challenge to government power so attempt to discredit it, I feel mostly out of anxiety the government isn’t what they think it is and it scares them.
Loans. Fully paid, with interest - the profits also went to Treasury. Also, they seem to have been a rounding error compared to the scale of the rest of the program, but you're right that the actions weren't exclusively Treasury. However, they were primarily Treasury.
Is not possible and all of it was a complicated shell game with analogies to money laundering. You have picked the wrong savior with central banks and are clearly drinking their Kool-Aid, roughly $8T of it.
That's a good opinion that isn't really relevant to the fact that in retrospect everything worked out great. What harm specifically are you seeking to point out?
Once adoption and implementation spreads, you'll realize you can open multiple channels with one on-chain transaction.
This is an evolving space and scaling happens already.
But sure, you can stick to the traditional monetary system where only a select few control the rules.
You are free to adopt Bitcoin. No one will force you :)
> But sure, you can stick to the traditional monetary system where only a select few control the rules.
No, a body accountable to Congress (the Fed) which publishes quarterly audits is responsible for the currency. They act on behalf of the American people. As opposed to an un-elected, un-accountable cluster of core contributors and mining pools who seem to operate principally to the benefit of North Korea, ransomware operators, Ponzi schemers and various other kinds of criminals - financial and otherwise.
> You are free to adopt Bitcoin. No one will force you :)
And yet, if you hold an S&P 500 ETF you're exposed to this toxic nonsense via index components. If you're a pensioner in Quebec, you're exposed to this toxic nonsense via their stake in Celsius.
These people don't control bitcoin. Developers and mining pool operators have their purposes in the network (designing new features and timestamping transactions respectively), but it's the users and node operators that validate the rules of the system. A code change to inflate bitcoin by 100% will never be adopted by node operators unless nakamoto consensus is reached.
- You can't open a bank account without KYC - You can send money without asking permission - You can receive money without asking permission - You can send money *privately* (onion layer) - You can send money around the globe faster - You can always take it on-chain on L1 via a submarine swap
Channel-based scaling is hard, sure. But optimistic and ZK rollups on other chains have both proven to be strong scaling alternatives.
The fact is, most people would/will probably use custodial LN wallets, which is against some "crypto" postulates, and comes down to well known MySQL argument.
The difference is MySQL on Bitcoin vs MySQL on USD (Paypal). As we will see in the coming months, fiat itself is a lot like a MySQL.
So I would argue that there is nothing wrong with MySQL on Bitcoin, and in fact, is an upgrade on fiat.
The fact that the USD didn't lose ~50% of its value in the last few months suggests the pro vs con is more mixed.
True privilege is being able to lose 70% of your net currency value in a single year without being on the street and advocating for it even after. For everyone else, there are better choices.
I suspect somewhere along the bull run you lost perspective.
I think the pandemic relief was a contributor but not a major contributor. One that would have been irrelevant had Russia not invaded Ukraine.
Higher interest rates don't increase supply (6% APR doesn't get any new oil out of the ground) they destroy demand. By second order effects, they decrease the money supply and hence prices. But that's not exactly an ideal strategy as we'll soon see. The 2/10 curve has been inverted for a few weeks now.
This is a weak attempt at ad hominem.
After all, isn't oil up over 100% in BTC terms in the past year? Surely y'all didn't print a whole ton of BTC did you? Since you didn't how do you account for that spread? And the lack of evenness in cost increases - shouldn't monetary inflation have even, broad-based price increases? Why is energy up 10X more than other things? Used cars?
So, someone who had put all of their savings in Turkish Lira would be better off today than someone who did so in BTC (and if we're comparing to the peaks for each year, it gets even worse - they would be left with only 39% for TRY, 29% for BTC).
Are there even worse currencies than the TRY? Probably. But the vast majority are actually doing much better, and even the TRY beat BTC as a store of value.
So, merchants will adopt it but users won't? So why would merchants want to adopt it?
I don't know why the internet thinks they can convince the world to use a new/better currency when they can't even make anyone switch off MySQL.
I'm not sure I see it function as a tool for increasing adoption, though.
Anyone can send someone Bitcoin by asking them to install a wallet (or giving them a paper wallet).
The story seems less simple if those were sent with Lightning. Maybe that's just a question of wallet support not being pervasive.
One nice property of money is that you don't need to have read extensively about money for someone to give you money.
This is true of cash, but not true of debit cards. It is actually quite rate for ordinary people to be able to accept a debit card payment, but that doesn't make debit cards not useful.
Venmo and Cashapp allow you to receive debit card payments, and there are no fees if you transfer the money to your bank account.
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.
I'll never understand why BTC Maximalists refuse to acknowledge faults in BTC and see how other currencies can solve them.
Why?
Is that because it's has 'Scarcity'? People will pay more for it in the future?
If that case is so soundly put why would you not buy as much btc as possible?
Playing a bit of devils advocate here but wouldn't you say that it's volitility leads to more trading?
Means of exchange need to be further defined in this crazy overfinancialized world we live in. total trading volume of BTC is absolutely insane.
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.
Remember that the US was on the gold standard with a similar inflation profile to Bitcoin and consumers were consuming.
Yes, people didn't eat much during the great depression, they had no money to buy more food even though there was enough to eat for everyone. How hard is it to comprehend that if you are unemployed you can't afford food?
If BTC results in unemployment then a lot of people are going to end up hungry.
>Remember that the US was on the gold standard with a similar inflation profile to Bitcoin and consumers were consuming.
We also had two economic depressions that lead to two world wars.
What did they do to deserve that? Watch everyone else create the wealth they take for granted?
>If that case is so soundly put why would you not buy as much btc as possible?
Because most people barely have enough money for their basic needs as they have to pay interest to financial capitalists and ground rent to land owners. They have no surplus to speak of that they could possibly spend on a deflationary currency. They are the losers of this system even though they are the ones who are doing the work.
Lightning reduces the amount of transactions that must be in the ledger, and in consequence the storage requirements can be kept down. The BCH model of just increasing the block size indefinitely is not sustainable.
There are benefits to scaling on chain, but as above, its not sustainable.
Encouraging transactions that don't need to be stored on-chain forever and a day would be better batched up. You can then at least still verify your address balances.
Verification of larger blocks scales quite well. Testers have proven this: https://read.cash/@mtrycz/how-my-rpi4-handles-mining-256mb-b...
What seems lost in this discussion is the idea that there can be (and maybe should be) a middle ground. Scale on-chain to the extent that technology allows and enables it. Surely, computers today are able to handle much more than Satoshi's computer in 2009, right? Simultaneously, building out off-chain scaling methods should also be encouraged. We don't need to put all our eggs in one basket.
Unfortunately, SEO scam artists began to game Google and now they are corrupting the blockchain idea, but I don't think we should underestimate the power of people who keep the faith over the long haul to eventually make something legitimate out of it
Banks could build an SQL database, generate a single Bitcoin address, and tell everyone to deposit there and prove they owned the originating address(es). You get credited in SQLcoins, which are centrally managed by a federation of banks. Once you want to go out, they send coins to an address of your choice.
If one of these layers becomes large enough, it might win the netwerk effect war and become the defacto layer 2 because everyone is on it.
Fast layer 1s.
That way I don't have to worry about integration between n layer 2s that my users are on (considering my users are unlikely to be on the same layer 2).
In practice, for Bitcoin, there is only one real L2 and that is the Lightning Network.
LN transactions are simply 2-of-2 multisig transactions made on-chain, where both parties can change the balance amongst themselves, and where settlement is possible at any moment.
Bitcoin isn't being used as money on-chain. Why is this controversial? Bitcoin is the equivalent of gold, which was the hardest form of money that is accepted worldwide, before bitcoin was invented. Using it as a settlement layer for higher layers is the obvious scaling solution if you wish to remain decentralised.
That definitely wasn't the original goal of Bitcoin though.
What’s your point?
A technology should achieve its founding goal or GTFO?
What was the original goal of gold?
>A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution
It's fine that we've moved the goalpost as we've come to understand the limitations of this kind of blockchain, but it's also fine to highlight that "store of value that you can't directly transact with" was not what bitcoin was designed to accomplish, originally.
FWIW, I don't even own a dime of crypto, I just find it disingenuous every time people bring up "it's failed to live up to it's email title so bitcoiners moved goalposts" as some sort of smack down, when those goalposts were set before the network even went live.
I'd like to point out that the word "cash" is used differently in the cyberpunk community from before 2008. BCH and BSV both interpret it as "money used for every transaction" and thus advocate bigger blocks, while cypherpunks back in the day used it for "permissionless value tokens" (my phrasing here).
Ironically, trying to prove which chain is the "real" bitcoin by interpreting word from the introduction of the paper goes directly against the almost everything that is written in the rest of the paper.
The idea of the Lightning Network is to allow transactions to exist on a separate layer where in theory transaction fees don't have to exist. & transactions don't have to wait for the next block. This allows for microtransactions etc. There are some blockchain transaction fees involved in creating channels & resolving disputes
This limited throughput led to a massive debate amongst the community about how best to scale bitcoin. One side wanted to change the blocksize (either a step-up in size or to use dynamic scaling), and the other main side wanted to keep the block size at 1Mb and implement off-chain scaling (Lightning Network). I won't recount their arguments for/against, or even tell the story of the debate because it would be very long and there was so much shenanigans involved that I would probably struggle to remain neutral. The long and short of it though is that the side that wanted to keep the block size fixed at 1Mb won out and got to keep the Bitcoin (BTC) name while the other side spun out into a fork called Bitcoin Cash (BCH).
Possibility of stablecoins on Bitcoin via the Lightning Network.
There are a lot of people that want to just hold onto Bitcoin right now. Maybe the cost of a Lightning transaction will go up dramatically if that changes? But if such a protocol evolves to support swapping coins in and out of the channel lockup from different owners than potentially anyone holding Bitcoin for any duration can contribute.
Doesn't even include the explosive growth we've seen starting in 2020.
- There are many ways for a malicious entity to rollback a payment and prevent it from being detected (just DoS the watchtowers).
- You still need to make an on-chain transaction to open a new channel which incurs on-chain fees and limits the scalability of LN.
It's incredible how money can corrupt large groups of people into convincing themselves that a solution works when it simply doesn't.
BTC stopped being practical for small payments when it got expensive. This is a way to make small, everyday payments cheap again. I'm not going to use LN to transfer large payments. "just DoS the watchtowers" is impracticle for a cup of coffee. Your second point is just plain false and there are many ways around those.
edit: not rhetorical question, actually curious since it appears to be working already
And don't forget, ordinary users need to monitor the blockchain 24/7 in order not to lose their money by a counterparty closing their channel fraudulently.
It's far from ready for use.
Well I will take them by their word.
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.
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 API calls to Lightning becomes very efficient, given the (nearly instantaneous) transactions can occur off chain.
I'm a big fan of mining with solar. Wish more miners were investing in this.
To be clear, the tech itself is interesting and broadly I remain fascinated in blockchain technologies and engaged with them to various degrees as you can see from my GitHub. But Bitcoin though? It's the oil of our time; dirty and corrupting.
Edit: to address your point about solar (which along with using mining for heating is clearly a good way of reducing direct CO2 emissions) it's only part of the problem... e-waste is another and a pretty big one at that.
Lightning isn't limited to Bitcoin, either. As long as the cryptographic algos are compatible, cross-chain swaps can be a thing on the network. That said, Lighting was initially architected to take advantage of Bitcoin's scripting and post-dated payment abilities (which are done using full nodes, not miners). That means anything using Lightning doesn't necessarily contribute to excessive power usage by the Bitcoin network. This is why I called out the attack on Lightning by association to Bitcoin. Would it, if used widely, contribute to Bitcoin's power usage problem? No, it wouldn't. Bitcoin's power usage problem is unique to the mining strategy for the chain, not the use of the transactions it enables, off chain.
Does Lightning still require on-chain transactions? Yes, but they can be done within the current capacity of the network AND even then that doesn't contribute much to the power usage given the full nodes process these payments, not the miners.
If mining came to a near halt, Lightning would still be functional. This means blaming it for anything related to Bitcoin is not a valid argument, which is why I said what I said. It's not that you are wrong about mining costs to the environment or energy markets, but more that the thing you are blaming has little to do with those issues.
Besides which, Bitcoin isn't the primary enemy here, it's the idea of PoW put into production plus human behavior to attempt to acquire wealth with it that is the real boogeyman. Ethereum is making a big bet on PoS, but some remain skeptical this can give way to a fair market. We'll see, I guess. Those folks appear to be way smarter than I am, even on a good day. In the meantime, Ethereum is still stupid slow and still uses PoW to do what it does.
The contribution to Bitcoin's power usage is a bit more indirect. The power usage of Bitcoin mining is capped by how much electric power miners can buy with the block rewards and fees (otherwise, the miners would lose money). The block rewards and fees are measured in Bitcoins, while the cost of electric power is measured in dollars (or whatever is the currency where the miner is located). To convert from Bitcoins to dollars, you multiply by the price of a Bitcoin. Therefore, whenever the Bitcoin price increases, the cap on how much power Bitcoin mining can use also increases.
By making Bitcoin more useful, Lightning Network can increase the demand for Bitcoins. As we all know, increasing demand while keeping the supply the same (and Bitcoin's supply is fixed by its algorithm, it doesn't change to track the demand) tends to increase the price. And that means miners have more money they can use to buy more power to mine Bitcoin.
I should make it more clear I'm far from a no-coiner and in fact I'm deeply familiar with the tech and ecosystem - e.g. i've written my own Ethereum ZK Rollup, written smart contracts, traded, made on-chain NFTs... I've been toying with blockchain technologies for a couple of years now, and transacting with cryptocurrencies for considerably longer across many L1s and L2s.
I mention that because whilst I find these technologies fascinating, as I say I think it's crucial to recognize the following:
- Bitcoin has failed to achieve its objective of being a new form of cash
- Bitcoin has failed its objective as a fair alternative financial system; in fact people are far more exploited
- Bitcoin has failed its objective to be truly decentralized
- Bitcoin is astonishingly bad for the environment
- Bitcoin advocates are incredibly toxic
- Bitcoin has facilitated illegal acts like no other technology
- Bitcoin has failed to prove it has any intrinsic value as proven by its 0.95 correlation with risk assets like tech stocks; people speculate with it and that's its only "use".
The only thing it's good for is taking money from people who want to escape their financial oppressors and putting it into the pockets of the rich. It's a negative sum game and on the whole it's the poor and disillusioned who lose.
Are those true of other cryptocurrencies too? More or less, I'd say. Can cryptocurrencies ever fix all their problems? Personally I doubt it but in theory it's doable. Do we even need these technologies? Most of the time not... but I recognize a need in some niche areas. Are these technologies even simply superior to the ones they replace? Largely that seems like not to be the case. Are there some good use cases? I personally think so, but they certainly don't justify the market caps and are the subject of another debate.
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.
But crypto-"currencies" are actually highly speculative assets (as South Africa declared today [1]). No bro will spend them - the ideology is to HODL for 100k remember [2]? Earnest patron saints like Laszlo Hanyecz bought two papa john’s pizzas in 2010 for what would be worth today roughly $200,000,000 [3]. They wanted a new currency, but today the purpose is speculation. The whole point is not to be the greater fool.
Bitcoin was never meant to be gold, it was meant to be spent. But that hasn't happened.
[1] https://cointelegraph.com/news/bitcoin-not-a-currency-south-...
[2] https://www.wealthsimple.com/en-ca/magazine/laser-eyes-crypt...
[3] https://www.the-sun.com/news/2935660/bitcoin-pizza-laszlo-ha...
Your point that BTC was supposed to be a currency and has turned into a speculative asset is true though, and BTC proponents often dislike it when someone points that out. LN is just an attempt to make BTC better as a "medium of exchange" which is fine, but it still doesn't address the fact that BTC is a terrible store of value, it just reduces the volatility of the transaction fee (in theory).