Are you taking into account anywhere the initial fee to open a channel in the lightening network? Or is that included in the 0.5%?
Last edited:
This article outlines very well the weaknesses of the lightening network.
The fact that Bitcoin prices are volatile is a major impediment to mass adoption as a medium of exchange. And yes I am aware of the argument that as adoption increases volatility will go down but that is a chicken and egg argument. People won't mass adopt it to begin with as a payment system if its volatile.
Basically the Bitcoin advocate argument goes something like this:
Mass adoption of Bitcoin will occur because of its store of value properties. Once it is widely adopted as a store of value the price will become stable and then people can use it as a medium of exchange. I can see the argument but I am not entirely convinced of its validity.
Basically the Bitcoin advocate argument goes something like this:
Mass adoption of Bitcoin will occur because of its store of value properties. Once it is widely adopted as a store of value the price will become stable and then people can use it as a medium of exchange. I can see the argument but I am not entirely convinced of its validity.
This is where a L3, such as Federated Chaumian Ecash mints would come into play. Consumers that want charge-back ability could opt to use a FediMint, paying a fee for the privilege. The bare transaction fee would be even lower than Lightning, because FediMints could settle with eachother once a day only with 1 lightning network transaction. Customer fees would support the chargeback feature, but presumably these would be even lower than CC fees.
It might not be FediMints, it could be some other L3 solution that hasn't been thought of yet, but just an example.
I agree, LN in its current form can't scale to every single individual. But it offers orders of magnitude more than L1. L3 will again improve scaling by orders of magnitude.
Each of these has a security tradeoff. If I were receiving 10 BTC for the sale of my software business, I want that on-chain transaction. If I am buying coffee from a shop, both me and the merchant are willing to trade a little less security and a little more trust in exchange for something that doesn't have enough value to warrant the security of L1, and the cost of that security exceeds the transactional value.
5 years seems a bit short to me, but 20-30 years, yes. It may not be on the Lightning Network for low value transactions. It may be some sort of quasi bank relationship like FediMint. Even LN has far to much security for such low value transactions.
Not every person will be able to own a UTXO...and they don't really need to. In order to scale, there needs to be some trust in the world. Do you trust your parents, your wife, children, your best friend, your neighbor? If there is a network of trust, there is no need for every single person to be able to transact trustlessly. Groups of trusted people need trustless transactions with other groups they don't know.
LN has good privacy for the sender, however not as good for the recipient. FediMints have 100% privacy. There may be ways to improve privacy on LN as well.
Physical cash is great...in person. Most economic value is not transferred in person now. And keep in mind the security risk of physical cash.
In all of the below cases, the government is immune from being sued for legal fees. All of the below cases, the people who got their money back, had to then paid it to their lawyers and court fees.
A 55-year-old Chinese American restaurateur from Georgia was pulled over for minor speeding on Interstate 10 in Alabama and detained for nearly two hours. He was carrying $75,000 raised from relatives to buy a Chinese restaurant in Lake Charles, La. He got back his money 10 months later but only after spending thousands of dollars on a lawyer and losing out on the restaurant deal.
A 40-year-old Hispanic carpenter from New Jersey was stopped on Interstate 95 in Virginia for having tinted windows. Police said he appeared nervous and consented to a search. They took $18,000 that he said was meant to buy a used car. He had to hire a lawyer to get back his money.
Mandrel Stuart, a 35-year-old African American owner of a small barbecue restaurant in Staunton, Va., was stunned when police took $17,550 from him during a stop in 2012 for a minor traffic infraction on Interstate 66 in Fairfax. He rejected a settlement with the government for half of his money and demanded a jury trial. He eventually got his money back but lost his business because he didn’t have the cash to pay his overhead.
Yes taking the channel opening fee into account. The actual cost in the channel per transaction is usually 100-500ppm (parts per million). 0.01% - 0.05%
If you are using a Lightning Service Provider (LSP) that is basically a company that manages nodes and liquidity in exchange for a fee, the fee the merchant pays them is 0.5%, which gives the LSP a profit after opening/closing channels and managing liquidity within those channels.
From the perspective of the consumer (as opposed to the merchant) what is the pain point exactly that Bitcoin is trying to resolve in terms of being a medium of exchange? It honestly seems that as a medium of exchange the current system is working well from the perspective of the consumer.
Most large retailers do not charge a fee for card transactions. Even with small retailers its usually free when its a debit card using the savings option and cash is always free (apart from certain pockets of the Nordic countries).
The only weakness in this scenario of fiat is the whole foreign exchange and remittance system.
That in my opinion is where Bitcoin really shines as a medium of exchange. Try sending $3000 to somebody as cash via western union. Between the western union fee and exchange rate fees/spread you will end up paying around 10%. International bank transfers are usually also expensive. Also when you go on holidays in another country the foreign exchange fees kill you.
However again volatility in Bitcoin prices makes it less attractive as a medium of exchange.
Quasi bank relationship doesn't that go against Satoshi's whole ethos of a completely decentralized network free of intermediaries. If we are introducing intermediaries is that just the same thing as the current system?
Even if Fedimints have 100% privacy how about the on ramps and off ramps into fedimint? Cash can on ramp and off ramp privately so its 100% private. Even Monero which is the ultimate privacy coin unless you buy it using cash or use a tumbler for your Bitcoin then they can know that you bought Monero. And both of those solutions are very high effort and inconvenient.
Ever tried to buy antibiotics or ivermectin over the internet with a credit card? Ever tried to buy gun parts using PayPal? Tried to send money to the Freedom Convoy with GoFundMe, or GiveSendGo?
I agree, in the west, there isn't a huge problem with the system, but there is a problem. Do you think that the transaction censorship problem will decrease, or increase?
They charge a fee, to everyone. In the US, cash payers also subsidize the credit card transaction fee that is baked into every consumer price. If a merchant chose to use LN, they could offer a 3% discount.
Yes, this is a growing use case for it as well.
That as you pointed out, is the last step of monetization. People are adopting it still, even though it is currently not widely used as a medium of exchange? Why?
It will be the medium of exchange when it is the biggest money. Just as your corner Starbucks in Lexington, KY is not going to accept 200 Yen for a coffee, or 100 Trillion Zimbabwe dollars...these are still considered money, even though they are not universally accepted.
People still buy Nvidia stock, even though they can't trade it for gas to fill up their car. They don't buy Nvidia because it has a stable value. No one would bother buying it.
People buy Bitcoin because it is volatile, and will use it as a medium of exchange when it isn't.
Having L2 or L3 on Bitcoin does not change Bitcoin. Everyone who uses Bitcoin has the option of using however much security they are willing to pay for.
You can hire Blackwater Security to escort you in a convoy of Abrams tanks to your corner Starbucks to protect you from being mugged for your $20 bill...just like you have the option of going on chain for every little transaction.
Most people are going to opt to pay for a lower level of security for a low level transaction, and a high level of security for an expensive transaction.
Security is not free, if there is no cost, there is no security.
I use LN almost every day, it is far more frictionless and secure than any bank transfer, or credit card transaction. Once or twice a year I waste hours of my life flagging fraudulent transactions, waiting for a new card, changing all my bills to the new card....I have not ever had that problem with Bitcoin, it just works.
Yes, maybe someone could see that you are a member of a FediMint, but everything else is a black hole. Unlike the current banking system where transactions are visible, along with account balances. And guess what, your government can reach in and take it whenever they need to. They can't with a Fedimint, because it is federated, probably in other jurisdictions, and they don't even know how much money you have.
The issue is not about security. I agree you don’t need high level security for small transactions. The issue is that when you rely on intermediaries it lessens the censorship resistant qualities of Bitcoin. Just like the Canadian government shut down Canadian truckers bank accounts what is to stop the government shutting down people’s fedimint accounts for example?
Also how does money get into your fedimint account without anyone knowing you transferred money out of your account to send it to fedimint in the first place?
Cash and physical bullion are still the only things with 100% privacy end to end.
You use lightening network almost every day? How? Very few merchants accept it at this point, where exactly are you using it?
The other big problem with bitcoin as a medium of exchange at this point is the tax system. Unless you live in El Salvador it’s going to be very unpleasant and complicated tax wise to spend your bitcoin.
Because lets say there are 20 members of the federation. The wallet is a 15 of 20 multisig. Members are in China, Australia, South Africa, Chile, Canada, Nigeria, Texas, etc etc. Even if all those governments agreed to torture their own people to get the keys, then what? I mean, I guess it is possible, but only in theory.
On can buy into it with a LN transaction, which as I pointed out has excellent privacy for the sender.
I don’t know as far as fiat rails, we are a ways off from Fedimints or some other L3 yet.
Most of this is value for value tips on podcast 2.0 apps (Fountain), Nostr, and stacker.news. If someone has a post I find valuable, instead of leaving a like, I tip a small amount. If 20 people tip a nickel, that’s a dollar. If it becomes as big as twitter, you could conceivably have posts receiving thousands, or millions of tips…directly, no middleman, no platform %cut.
A nobody like me, with a half dozen tips here and there, and I still get a net of $20 a month or so not counting all the tips I send out.
Some merch here and there, and ebooks.
I have a family friend that I settle with using LN: when we do a family trip, we settle the split on the big expenses like gas and lodging.
imagine a Waze app where, instead of leaving a like, you could send a tip to the person that flagged the hidden speed trap? Or send a tip to the restaurant reviewer you checked on google maps?
Last edited:
Being able to exchange value, peer to peer, is a true game changer. We can’t imagine what new business models will emerge from this. It will be a completely new paradigm that is hard to fathom.
No platforms, middlemen, no permission, no KYC, no taxes. You provide me your value, and I pay you, and no one can stop it.
Like your first BTC transaction, your first LN transaction is a lightbulb moment. It is transformative on your thinking.
No platforms, middlemen, no permission, no KYC, no taxes. You provide me your value, and I pay you, and no one can stop it.
Like your first BTC transaction, your first LN transaction is a lightbulb moment. It is transformative on your thinking.
Someone mentioned buying a coffee with btc would be a mistake because of fees etc. kaspa, alph or Sei it won’t be an issue .
Btc will continue to be a hedge against inflation and an investment for the future but probably will never be used for point of sale
Except for pizza 15 years ago
Btc will continue to be a hedge against inflation and an investment for the future but probably will never be used for point of sale
Except for pizza 15 years ago
Last edited:
None of those will be used for anything but fleecing people of their real money. Go buy something with Kaspa. It’s a casino chip. There is no market for it outside of the casino. it’s only function is to get you to spend money at the casino.
BTC is used for PoS…not universally…but infinitely, literally, 1 divided by 0, more than any scam coin.
You haven't addressed the tax issue when it comes to spending bitcoin for purchases. For most countries that is still a huge issue of potentially having to pay capital gains tax every time you use Bitcoin to make a purchase. That is a huge impediment currently, although the rules may change in the future.
Not sure who you mean by “you”
The countries where this will be a big issue is where the currency is totally destabilized
You have workers where they work a day job and get their paycheck and want to cash it , the inflation has skyrocketed and their money isn’t worth as much. So they would be more open to using crypto for getting paid and using as a payment method.
And yeah taxes will always be an issue.
If you feeling risky, when you fill out your tax forms and they ask if you sold any crypto, you mark “no”
(Kidding, sort of )
Average varies, but a lot more than 10 minutes - maybe 2 hours - https://ycharts.com/indicators/bitcoin_average_confirmation_time
There are no Bitcoin layer 2 solutions that preserve Bitcoin's properties. It appears it's impossible. If it was I think one of the several Bitcoin L2s would have implemented a real L2. The people involved in those projects are not uneducated on the topic and have millions at their fingertips. SPACE (BTC L2) has a former BTC core dev on the team and it's not an L2.
It's been argued that anything other than proof of work is insecure in the last two pages and further back in this thread. The Lightning Network does not use proof of work or even proof of stake. These are mechanisms of multiple nodes in a network validating transactions. With the Lightning Network (LN) the consensus is reached by only two nodes. So it is less secure than any POS chain and the number of nodes is not really relevant to security. LN has a system of guardian nodes or watchtowers to try and stop either one of these parties in a transaction running with deposited funds.
I don't know much about this, but if you search you can find a a lot of posts online of people who have lost money on LN due to fraudulent activity on the two node consesnsus mechanism.
Here is a report from a few years ago, which says they identified 1,000 BTC in activity on LN, where the two nodes did not reach consensus.
LN network nodes hold funds with themselves in a very low security network and then write to Bitcoin later with batch Txs, to settle the transactions on LN. 0% of BTC's security is preserved by LN.
If 1% of global big transactions were made directly on BTC and 99% were made on LN, then 99% will be made on a low security network. It doesn't make sense. But then you have the issue that Bitcoin can't currently handling the Txs of some gamblers, so it probably wouldn't be able to handle that 1%.
Number of fraudulent Txs on BTC - I believe - zero
Number of fraudulent Txs on LN - not sure, but an unacceptable amount
It comes down to this - unless BTC maxis can demonstrate that Bitcoin can support a real L2 that preserves all of Bitcoin's security - Bitcoin has no long-term use case. Anything built beside Bitcoin has to build security from the ground up.
This doesn't make any sense when there are multiple POW chains that can process 10k-40m TPS in a second or several seconds with much lower fees and less energy use and with useful mining activity. This is the first cycle when the blockchain trilemma appears to have been solved.
But even then, the projects (Alephium, Kaspa, Qubic and SPACE) that have solved this need to be tested. I am holding multiple projects for the season cycle. But I only envisage buying one again in late 2026-27 - Qubic.
Last edited: