Bitcoin, bästa argument för och emot

Channel-open transactions must be broadcast on L1, but there is simply not enough L1-space.

“Factories” can onboard more users per L1 txn. Unfortunately, they can be sabotaged for free. CoinPool has the same problem (when it comes to LN-onboarding). The limitation is fundamental.

There are scenarios where LN-users consume more bytes than L1 “onchain” users. These are interesting, especially when it comes to use of HTLCs.

The “TLDR” Summary
To reach anyone in a big network with a series of branching channel connections, you either need a large number of channels, or a large number of hops.

Both are a huge problem. A large number of channels means users have to divide up their funds and can’t do anything except tiny purchases. And a large number of hops means everyone’s money will be tied up routing everybody else’s money.

Conclusion: A Completely Unworkable System
As the network reaches a million users, it seems there will be no realistic way to avoid these problems. Dividing funds into many channels and continually loaning out money both make the network unusable.

The only conceivable visions are either A) everyone deposits MUCH much more than they need to transact with, or B) the system depends on large centralized hubs.

Neither is a decentralized scaling solution, or even a major part of one.

How the Lightning Network Helps Combat Bitcoin’s Problems
By consolidating numerous microtransactions into a single one, the Lightning Network can reduce network traffic. Taking these microtransactions off the main network ensures ample space for larger, higher priority transactions and enhances processing speed.

The Lightning Network also improves scalability by transacting and settling off-chain.

How Can a User Benefit from Bitcoin’s Lightning Network?
The biggest pros of the Lightning Network are its speed and affordability. As mentioned above, on the Bitcoin network’s base layer fees and waiting periods can be prohibitive. However, with the Lightning Network, you can send and receive small payments in a way that is simply not feasible on Bitcoin’s network. You can swap payments numerous times before closing the channel and completing a single transaction, all for one fee.

Because the Lightning Network operates as a secondary layer on top of the main network, it still offers users all of Bitcoin’s standard security protocols. Users can also switch between networks, according to their needs, accessing the Bitcoin network to complete large transactions and switching back to the Lightning Network for microtransactions. Finally, the transactions associated with the Lightning Network are private, occurring off the blockchain and recording only the overall results.

With that in mind, let’s review how Lightning could fit as a puzzle piece to assuage Bitcoin’s fundamental tradeoffs:

Instant
In Bitcoin, users wait for their transactions to be finalised in a process that’s designed to prove the passage of time. The target time between blocks is optimised for robustness and reliability, not rapid transaction speeds. Hence, this scheduling dynamic requires users to sometimes accept wait periods on the order of hours.

As an alternative, using payment channels, Lightning forwards payments at the same speed as an email is sent across the internet — instantly.

Low cost
In Bitcoin, transaction fees have been increasing due to network congestion and the demand to send bitcoin.

While sending a routed payment across multiple channels will incur fees, these fees are negligible and subject to competitive pressure. At the time of writing, the base fee per transaction is 1 satoshi (0.00000001 btc), equivalent to ¢0.04.

High Capacity*
In Bitcoin, transactions are settled as part of a block that’s limited in size (~ 1.3Mb). This confines Bitcoin to linear scaling efforts where either transaction sizes or block capacity limits would need modification. While technological advancements have assisted in the reduction of transaction sizes, increasing block size would be counterintuitive to Bitcoin’s prioritisation of security and robustness.

Alternatively, Lightning removes the concept of a block such that payments are simply limited by the liquidity in each payment channel. This opens Lightning to scale horizontally as it becomes increasingly more efficient to transact when more payment channels are open and capital is efficiently dedicated to the network. Throughout 2020, Lightning’s capacity rose roughly 22% and active nodes rose roughly 41%.[14] At the time of writing (July 2021), Lightning is on pace for a record year with capacity rising another roughly 90% and active nodes another 52%.[15]

In summary, Lightning as a second-layer inherits many of Bitcoin’s characteristics as its global, cross-border, and accessible by anyone. However, through its use of payment channels, Lightning enables users to amortise the cost of a bitcoin transaction across many payments over time. We see Lightning as a critical technology that could evolve bitcoin’s usefulness in payments beyond its stigma as an investment vehicle.

Key Takeaways From “How Bitcoin’s Lightning Network Works Under the Hood”
The Lighting Network provides:

A speed increase in transactions. They’re almost instantaneous.
A reduction in cost. Transactions are almost free.
An improvement in privacy. Only the final settlement is broadcasted on-chain. There can be infinite transactions between both parties before that, and those are not reflected in Bitcoin’s permanent record.