Topic: Increasing bitcoin throughput without centralization (Read 235 times)

Some of his other arguments are also slightly off. Like the scenario of LN collapsing due to people liquidating and closing their channels during bull runs.

The way I see it unless someone were to liquidiate all their Bitcoin holdings, open channels would be the last thing to liquidate as those are the coins for daily expenses rather than long term holdings. Also given more widespread adoption LN would be the cheapest way to move money onto an exchange which would be another reason why channel closure would be literally the last thing to do when completely divesting.

I don't really get the reason why they were criticized in the video. Watchtowers cannot sniff around any random payment channel. Even if one was using a third-party watchtower service, they would be unable to learn anything about one's channel unless an outdated commitment transaction was broadcast. The watchtower holds the latest encrypted penalty transaction. It can be decrypted only if the aforementioned condition is met. See bolt13 for more information.


How do watchtowers make it easier to use the Lightning Network?

If you're talking about Taproot,
1. Taproot doesn't enable "smart contract", but allowing more complex script potentially at lower cost (such as signature aggregation on multi-sig setup and only reveal necessary part of the script for HTLC).
2. There's no correlation between Taproot and centralization. There are time for Bitcoin community (node, exchange, wallet developer, etc.) to support Taproot after majority miner signal that they ready to support Taproot.

You seem to have read some... terms... here and there, but haven't really understand them.

1. LN doesn't bring centralization. Not by design. On the other hand, users and their habits may create problems, by keeping their coins at centralized custodian service providers (which will probably open LN channels for them too). But that's not centralization of Bitcoin (network, nodes), it's centralization of funds.

2. Taproot making bitcoin "appear centralized"... wow... what?! No. Not related.

There was never a "speed issue" with bitcoin transactions.
There is only a capacity issue with the way blockchain is designed, which is: we can't have unlimited block size and no matter how much it is increased there will always be more transactions than block size. So another layer is needed to handle virtually unlimited number of transactions without the restrictions of a block.

Bitcoin had "smart contracts" from day one of its inception. However those contracts have always been restricted to what a payment system needs without introducing weaknesses in the protocol.
Then other projects came along and copied bitcoin protocol and added those weaknesses and introduced attack vectors to their "new" script language and called it "smart contract" which people think of when they hear the term. Bitcoin will never add these vulnerabilities.

Some nodes are better connected than others since they exchange coins with more users (i.e. an exchange is dealing with more counterparties than you and me for example), however that does not necessarily make them intermediaries in the classical sense. That is, even major nodes can't block specific transactions (as neither origin nor recipient are known to them) like, say, a bank could. I'm not sure how robust the network currently would be if multiple major nodes were to go offline, but overall robustness should increase as nodes join the network and routing algorithms gets improved.

The concept of watchtowers is often critized (for example in the video you linked), but they are not necessary for using the lightning network. They do shine a light on a bigger issue with lightning network though, which is ease of use compared to on-chain transactions (i.e. watchtowers are mostly meant to help with that). Nonetheless I do believe usability will get better in time, just as is the case with any software.

About the alternatives: On-chain approaches like sharding or the good old big block are unfortunately largely prone to centralization and stand to offer a lesser increase in transaction throughput than lightning network does. Opinions on this matter widely differ of course, but that's a different can of worms.

I became fascinated with the lightning network after watching a Coin Bureau YouTube review about everything you need to know about the lightning network here. It was an interesting review until he got to the part where he was talking about the disadvantages, and I was curious why adoption was associated with centralization. It will be disappointing if transaction throughput can only be scaled in a centralized manner, raising the issue of intermediaries in the Bitcoin Network.



The first question lead to the second one, pardon the ignorant question.

I've really bored reading repeatedly the whole situation where the lightning network is brought as a centralized solution. This shows me you haven't understood the basics of how it works.

When you're depositing money to a lightning node, you aren't handing out your custody. You're still the owner of the coins from the Bitcoin block chain, which is decentralized. The node can't move them without your signature and thus, they're unable of restricting you anything. Even if the lightning node went offline, you could still recover your money.

It's not feasible nor practical with on-chain solutions. Only if you do it off-chain there's improvement.

As of today the lightning network is rather decentralized:
https://explorer.acinq.co/

There will always be some nodes that have more channels than others (e.g. exchanges and payment gateways) however the rest of the network doesn't necessarily rely on them so the threat of centralization seems rather limited.



How would Taproot lead to more centralization?

The development of the lightning network has solved the speed issue with bitcoin transactions, but it is moving its goal to a centralized organization.
I'm interested if it's feasible to improve bitcoin transaction throughput while retaining decentralization.

Another issue, the bitcoin upgrade is coming, and I heard that Bitcoin may include a potential smart contract, but it would still make it appear centralized, is there any way for devs to do that while keeping decentralization?