Topic: Can Lightning Network Hubs be owned by banks? (Read 710 times)

well you might want to check the title of this topic and have a few words with the topic creator..
...

the answer to the question is.. banks wont need or want to have LN hubs.. they are fiat businesses
it will be retailers and silberts factories as the hubs(LN banks)


look at the topic title incase you forgot that i did not pose the question of banks and LN

it was me that just told you and the topic creator that banks wont use LN.
i even done a lil drawing to make that point clear.

node liquidity is not the same as network liquidity

if the network cant use it. its not network liquidity. its just node liquidity

anyway back to the topic

exchanges dont actually have money moving from banks to exchanges. so banks dont need LN for their fiat reasons
banks also have to do things legit. so they wont use a funky network with vulnerabilities. instead they use officially regulated OTC platforms
the banks just use their own bank website API to display deposits in exchange accounts(held at bank) separately from the exchange server.

so the main hubs will be exchanges. retailers and things like blockstream factories.

eventually the network will look like this:(dumbed down diagram)
                                                                            /-users 0001-1000
       |-------- [walmart]<-|        |-----> [BS factory1]-users 1001-2000
       |                             |        |                 ^         \-users 2001-3000
       v                            v        v                  v         /-users 3001-4000
[exchange]<-------> [BS greyscale]<->[BS Factory2]-users 4001-5000
       ^                          ^        ^                 ^          \-users 5001-6000
       |                            |        |                  v          /-users 6001-7000
       |------[starbucks]<-|        |------->[BS factory3]- users8001-9000
                                                                            \-users 9001-10000

if you think nodes just open and close channels randomly and continuously..
if you think nodes need to be bilateral
maybe you forgot a few of the flaws and features of LN...
(onchain fees.penalties.lock times)
again the
A-B-C     H
   |         |
   D-E-F-G

B does not need to do a 'uncooperative close' early on A or C
G does not need to do a 'uncooperative close' early on H

again if you use LN or run scenarios. the AB channel can just be
A<100:0>B with B not putting any funds into his side.
many LN devs have a special buzzword term for this.. a unilateral channel
(sounds sciency right. gotta love their buzzword play..but i hope i explained it as it seemed to have escaped you)

yes if it was a bilateral channel(route) because B sees AC as a potential routes then B would put funds in..
but remember we are dealing with nodes in unilateral concept.
let me map it out better
A<10:0>\
              B<10:10>D<10:10>E<10:10>F<10:10>G<0:10>H  
C<10:0>/
now you can see the bilateral channels BDEFG and unilateral channels ACH

now ask yourself if B has no funds locked to AC why would B close early and risk a penalty
especially if he has no funds to cover his fee to even do so. .. (no funds.. no fee.. no way)
same question for G it has no funds locked to H so why would G close early and risk a penalty

anyway..
now we have covered the humanising of the bilateral/unilateral buzzwords.. ACH can stay partnered and cause mischief bouncing and cancelling payments or delayed cancelling to cause issues with BDEFG liquidity without costs ACH anything

to clarify in case its still misinterpreted

a LN node will only provide liquidity if it opens channels between more than one partner and contingent on allowing routes
not allowing routes=no extra liquidity
eg i can have 50 channels.. no routing=no liquidity

again many many reasons to put channels on the network not for route liquidity.
network analysis being one.

once you realise the hop model cant scale and the hub model prospers. you will drop all debate about 'users purpose on the network is to provide liquidity' and realise users purpose on the network is self serving their own interests
anyone teaching your purpose is to serve others. just wants to use/abuse you for their purpose

Get the context. You’re not listening.


Who said they need LN for anything? You? Isn’t LN’s main purpose to increase utility for small payments IN Bitcoin?


Why are you so bothered about banks and LN? The banks WILL NOT use LN, but the exchanges, merchants accepting Bitcoin might, and attracted towards an off-chain layer if it becomes more convenient for them and their users.

I know that, but the point being made is that for each node to START somehwhere in providing liquidity in the Lightning Network, is for nodes to connect, and open channels with its peers. How would you bootstrap the network without opening at least one channel? Or, why run a Lightning node at all?

This was created during December 2017 the timer were Bitcoin first reach 19,000$ and his assumptions was based on the scaling solution (LN) as the alternative for sending and receiving Bitcoin as the fees on the normal Blockchain transactions were ridiculously high which he pointed out earlier in the video. Now Almost 4 years have passed and I think it is safe to assume that he may have overreacted with the situation Bitcoin had during December 2017, Banks have not monopolize Bitcoin in any kind of Lightning Hubs and on-chain transactions aren't 20-30$ ever since SegWit and LN has been applied for Bitcoin. Also why not to worry about Banks creating their own Lightning Network is most probably is they heavily enforced by AML and KYC regulations as obviously they will always be under the surveillance of the authorities, before you can use this Bank-run LN hubs all users will need to submit KYC which I don't think a lot of people will like especially if there are other non-KYC alternatives.

I think in the first world countries, large Exchanges will dominate with their LN hubs.... but in third world countries a bunch of smaller operators will dominate at first and then as the technology become more popular, the bigger companies will get in on the action and they will start dominating too.

The people using the LN hubs will not even worry about who are behind these hubs as long as their tx's are fast and cheap. Banks will definitely fund hubs, when they start losing income. (This is still very early and no threat to them now)  

If you have 50 open channels and are not allowing transactions, it will not be long before you have 0 open channels because other nodes will close their channels with you in favor of opening channels with other peers who are willing to allow transactions to flow through the channel.

A LN node will actually need to have at least two open channels to provide liquidity. In order to provide liquidity, one of your open channels is sending a transaction to another of your open channels through your node.

I think what franky1 is saying is that an adversary could open many LN channels to monitor the balances of as many LN nodes as possible while not providing liquidity. If there is someone who is constantly refusing to sign new transactions, a LN node operator would probably close the channel. If an adversary were to provide liquidity while trying to figure out the balance of each side of each open channel while providing liquidity, they would need to make many transactions (if they attempted to make transactions they don't sign, they would run into the same problem of having their channels closed). The solution to this is simple, have a user-configurable minimum and maximum amount they will allow to be on their side of their channel, and a maximum individual transaction size they will be willing to sign.

Not entirely true. A Lightning node that has at least an open channel does provide liquidity, doesn’t matter if it can refuse some routes. IF it refuses ALL routes, then why open a channel, or why run a Lightning node at all? To participate in Lightning as a node, is to provide liquidity.

That is the beauty of it, being a permission-less network anybody can jump in/off at will and do actually whatever with it. This applies to Bitcoin and the LN too. Therefore, I completely agree with the above and that is what I am witnessing in the real world outside of bitcointalk.
For the above reasons I still do not feel confident to use the LN on a daily basis.
 

For a non-technical person like me, and after reading so many of your posts, that when researched were discovered to be mostly disinformation, gas-lighting, and FUD, would you expect that person to trust and listen to you? Actually, I hope they do. To make them learn the HARD WAY.

LN node isn't equal liquidity. You still need to run LN node and make a channel to try possible routes, but you can refuse to route any transaction or actually make payment.


Chainalysis already suspected doing it on Bitcoin network when they caught run lots of full nodes, so it's possible they do same thing for LN watchtower and server for SPV wallet (such as Electrum).

https://www.consumeraffairs.com/news/irs-offers-625000-reward-to-anyone-who-can-create-tracing-tool-for-monero-cryptocurrency-or-the-lightning-network-091120.html

https://www.reddit.com/r/Monero/comments/j2qm42/chainalysis_and_integra_fec_have_won_the_recent/

https://blockonomi.com/watchtowers-bitcoin-lightning-network/

https://www.coindesk.com/blockstreams-watchtowers-will-bring-a-new-justice-system-to-the-lightning-network

Just a guess on my part, but I imagine that using Chainalysis secret tool in addition to running a WatchTower would allow for forensics to be observed on the Lightning Network Payment Channels. Their is no locking bitcoin requirement for WatchTowers operators to provide liquidity, it could be done at a minimal cost and may even earn some payment for the watchtower service.

That’s the point of the post. To monitor all transactions in Lightning, the government will need to be a liquidity provider in Lightning, helping the network scale.


Is this true? I don’t want to ask Bitcoin Stack Exchange, and prove another franky1 post wrong again.

- gmax, achow,

You make a compelling argument, but I suspect many exchanges are hesitant to do this because it would create a customer service/support nightmare. When a LN transaction fails, it could be because of the current topography of the network, or it could be a problem with one or both of the participants.

The exchanges also would not be able to open channels with all of their customers for their entire balance because doing so would prevent the exchange from having any of their coin in cold storage. If you have 1 BTC on an exchange, and you want to receive a LN transaction from the exchange in the amount of 1 BTC, the exchange will need to either have an open channel with you with sending capacity of at least 1 BTC, or for there to be a path of channels between the exchange and you with capacity of the same amount. An exchange could have a very well-connected node that many customers can receive withdrawals from and make deposits to, however, some deposits/withdrawals may fail.

Pools could fund a new LN channel with coinbase transactions. This channel would generally immediately be spent in its entirety in order to pay the miners, and the miners have bills to pay, so they would generally need to send the entire amount they receive to an exchange. This means there is a lot of one-way transactions on LN, instead of back and forth transactions that LN is really designed for.

---

I think it would be more likely for exchanges to operate very well connected LN nodes, and act somewhat like "banks". I can see major exchanges opening large LN channels amongst themselves in order to facilitate transfers between exchanges.

What’s funnier are the people who spread FUD that the government will monitor all Lightning transactions, just as they’re doing with onchain transactions. OK, then government will run Lightning nodes, buy Bitcoin, and then open payment channels? Thanks for the liquidity.

Those two (Eclair and Zap - and to a lesser extent Blue LN are the only wallets (as an end user) that I am familiar with.  I'm sure there are some/many LN wallets for back of house applications.


Banks may have been slowly buying up bitcoin - a little at a time (as low as one bitcoin per week) so as not to draw attention to themselves.

After writing the above, it also occurred that multiple nodes/hubs could be set up by a person or organisation with deep enough pockets in various parts of the globe to have not just one mammoth node/hub, but a dozen/dozens of smaller niche nodes interconnected between themselves, and also to a slew of much smaller nodes/hubs with minute channels, thus having two or more steps in the link from sender to receiver.

Sorry I cannot help myself stop smiling on this one as it would be awesomely funny to see a banker connected to the Lightning Network via Eclair or Zap.
Jokes apart, I agree with you and I believe banks could be the ones benefiting the most from a widespread and increasingly adopted Lightning Network.
They first offer bitcoin to their clients (eating on fees like exchanges do) and then they could re-direct their clients on their hubs to offer them both their own services and access to the network to freely transact with other peers.
Bank hubs will be the future of LN, whether we like it or not.
Look at what happened with the bitcoin treasuries, it is only about time.