Topic: Lightning Network effect on Bitcoin's price - page 2. (Read 14946 times)

It is not quite so

As I explained just yesterday in this topic, a thin market makes manipulation easier for any direction. As it happened with the market at the top, it is also possible with the market at the bottom (though I agree it is a bit counterintuitive). The thinner the market the easier it is to move it in any direction. So if supply decreases (for whatever reason, including the effects of Lightning Network) and this decrease is followed (or preceded) by the corresponding decrease in demand (for whatever reason as well) to keep the prices at the same level (if we accept your assumption of everything else being the same), the market becomes more susceptible to manipulation due to less available liquidity and shallow orderbooks

All else equal, it would remove coins from the market. That should amplify the effects of increased demand, which should push price upwards. It's the same as the altcoin markets: People buy BTC to buy altcoins, and bitcoin holders also send their BTC to altcoin exchanges instead of selling for fiat.

There's no reason this would make it easier for whales to push price downwards.

That's the point I was trying to get across many times myself

But it was falling mostly on deaf years, alas. It is like claiming that larger blocks will lead to an increase in adoption rates while even today's blocks are not filled to their limit, apart from periods when the network gets hit by a bout of massive spamming. Basically, people claiming that are putting the cart before the horse and confusing cause and effect. In other words, LN will be used whenever there is a need for it, not the other way round, i.e. no need will arise just because of LN being released into the mainnet


So far the number of coins locked up is mostly irrelevant to produce any substantial dent in the supply, but as I have already mentioned earlier, it is the expectations (aka hype) that may have their decisive say on the price

LN is cool but at this stage of its development the only merchants willing to actually embrace it are ones catering towards nerds. It's nowhere near becoming user friendly so no real adoption will happen because of it - which in turn means that it shouldn't directly affect the price because of good adoption news.

HOWEVER

The more BTC we have locked in LN, the less there is on the market. The less float there is on a market, the easier it is for whales to manipulate the price.

Good news is that for most of them, the most profitable manipulation is by pumping the price. But downwards movements might also be more extreme.

In either case, it's worth observing closely

Who cares? Are protocols never supposed to be upgraded to allow new features? Are we supposed to live with the malleability bug forever because you want us to?

Lightning adds utility to the Bitcoin network. It's a net positive. You can continue using only Bitcoin if you want. What's the harm in LN users using Bitcoin sometimes and LN other times?

The labor cost party is definitely beyond redemption

How low should Bitcoin's price go till you understand that the cost of production has no effect on price whatsoever, and still more so with Bitcoin, given its adjustable difficulty rates? When Bitcoin first crashed to 6k, many folks around here started to preach that it wouldn't go below 5.8k because such was the cost of production back in the day. And now it is being traded below 4k with Bitmain laying off thousands of its employees. Some dude here even promised to eat a live frog if Bitcoin would stay below 5k till the end of the past year. And what d'ya think, it had stayed below 4k most of December, not even speaking of never coming close to 5k during the year end. The fate of the frog remains unknown, though, dead or alive, in case you are curious

bitcoins main thing that raises the price SUSTAINABLY is the market:mining dynamic

its why POS is so crappy. because even with beleived "better features".. the cost of its creation does not play out a good "whats the cheapest way to get the coin.

if it costs $4100 to mine 1 bitcoin then people would b willing to pay many thousands just to buy it...
.. as long as BITCOIN has utility and desire

if a PoS costs $0 to make then people wont pay thousands for it.

yes there is speculation on top which is where bitcoin moves way up from the underlying value.
yes there is speculation on top which is where PoS coin moves way up from $0 value.

but the speculative layer ontop value is subjective and not sustainable.
so LN is more speculative than an actual thing that will provide sustained underlying value

..
once you understand that. you can then run scenarios. and if bitcoin becomes to costly to transact as a bitcoin network. people will exit LN using other altcoins. thus making bitcoins desire/utility far less.
if desire for bitcoins net work desire declines people will end up mining other coins. again less desire for bitcoin when the mining:market dynamics play out.

so those fluffy clouders that over sell LN not realising that it can actually make things like litecoin become more popular, end up shooting themselves in the foot overselling LN and not concentrating on BITCOIN NETWORK things

You seem to discard or forget the psychology thing. It is not a secret that most of Bitcoin value presently is speculative in nature, i.e. it is not determined by Bitcoin's real use, for example, as a vehicle for moving wealth around (otherwise known as transactional utility). It means that just a noticeable expansion of Lightning Network use in Bitcoin will suffice to instigate a speculative interest for it all over again. That's what I'm writing about in the OP

As an aside, the tenets of the subjective theory of value are fully applicable here. And this theory says that value of an asset (or anything else, for that matter) is determined by what people think of its qualities, even if they are imaginary only (though actually having such qualities helps a lot). In simple terms, if people start to believe earnestly in the success of Lightning Network, the Bitcoin price will surge despite the technology substantially lagging behind

That's one of the reasons why Bitcoin has risen to such heights even if its real world use remained minuscule

LN has never been a bitcoin feature its always been a separate network.. infact bitcoin needed to change to become compatible to LN... LN did not change to be compatible to bitcoin

so stop advertising it as a bitcoin feature as if its something that will boost bitcoin and saying its somthing that bitcoin has and its linked as a bitcoin feature and a layer of bitcoin.. in a way that foolishly implies that it will make bitcoin supreme compared to other coins

what you then need to do stop saying bitcoins network needs to raise fees and shouldnt scale the bitcoin network with your empty fear arguments that scaling bitcoins network would harm bitcoin node users
purely to attempt to get people to depopulate bitcoins network and to then not want to return to the bitcoin network
i say this as your the one that seems to want to reduce bitcoins desire/demand/utility.
(much like 18th century banks told people to vault up gold, use co-signed accounts/unaudited payments. and then only exit with silver)
its the old thunderdome: 2 coins enter one may leave

so if you really want to promote LN FACTUALLY and fairly
1. inform people that its a multicoin separate network useful for a NICHE of users that spend often
             emphasis on niche..
             not something for everyone
             not essential thing that solves everything including scaling
2. inform people of the risks (not just the fluffy unicorns)
3. also try to persuade devs of bitcoin to adopt a fee priority mechanism for bitcoin to punish spammers(regular spenders) more than just average people. thus incentivising regular spenders into the niche use case of LN. while not harming everyone else who wants to fairly remain on the bitcoin network

atleast be critical (meaning pros and cons).. rather than the fake over promises/ under commitment fluffy cloud stuff you have been pushing

I've never seen a compelling argument from you as to why this is a problem. Interoperable protocols can give us unprecedented functionality. Why does it have to be unique to Bitcoin? In fact, nothing is going to be unique to Bitcoin since it's open source and permissionless. Anyone can port its features into other altcoins and protocols.

Yes, at first I wanted to delve into that matter a little deeper but then I thought it might be too much for one post. There are of course second level effects of Lightning Network (pardon the pun). Just to name a few, a shorter supply will most certainly add to volatility, not so much to price, at least not in the first phase of the Lightning Network adoption. It will take some time before the transactional utility kicks in for real and makes the price grow organically (as opposed to purely speculative growth). On the other hand, the spike in volatility itself will adversely affect this transactional utility that Lightning Network provides

So in real life the effects will be pretty much complicated to be reliably estimated in advance

Lightning might not be solely related to Bitcoin, but once it does what it should be doing in the most convenient possible manner, the little utility that Litecoin has, which is relatively fast and cheap on-chain transactions, will become less of a thing as time goes by. It's not for nothing that Charlie Lee dumped the majority of his holdings. If you had any sort of grounded faith in your own project, you wouldn't be doing that.

People use that what they consider to be the most reliable and adopted networks, and Litecoin isn't part of that. I'm not saying it will vanish, but it is standing on its last legs. Bitcoin and Ethereum are the only ones with a very strong network effect, and the trash coins below them don't stand a single chance.

Lightning Network stats are objective but it's difficult to grasp its full effect on price dynamics. It adds utility, but it also encourages people to run Lightning nodes so they can collect routing fees. If coins are being locked in channels -- or in some cases, bought specifically to lock in channels -- that lowers available Bitcoin supply on the market. That should definitely benefit the price.

Buddy, I don't quite see your point

But you definitely miss mine. I'm not questioning Lightning Network's capacity to be used for coins other than Bitcoin. Moreover, I'm well aware myself that LN was first activated in Litecoin (in April, 2017, to be exact). But the question is whether it can actually be used as a metric to gauge the success, or lack thereof, of these coins (in this case, Litecoin) like we can do now with Bitcoin. That's what I wanted to emphasize in this topic, that for the first time ever we have something really useful and pretty straightforward for that purpose with the least amount of noise. And that's where Bitcoin differs from other coins this time



Basically, we have a finger (well, two fingers) on its pulse as a value transfer vehicle

LN is not a bitcoin only network feature
LN is a separate network that multiple coins can and do use.
the proof that its a different network is to simply ask you what does N stand for in LN

LN will still function even if no bitcoiner uses it because litecoin, vertcoin and other coins will use it.

sorry to burst your overpromised over advertised fluffy cloud. but LN was only hyping up the "bitcoin" buzzword
to hype up some investment from VC's

just like Circle(a fiat company)
just like Coinbase(a fiat company)
where they too play around with multiple coins/currencies. but kept on shouting out "bitcoin" to get funding

again sorry to tell you this but lightning will not give bitcoin any unique functionality

research it. hint: chainhash
here ill even show you a few lines of code that LN is not a bitcoin feature but a separate network for different coins
https://github.com/lightningnetwork/lnd/blob/master/chainregistry.go#L580

^note LITECOIN is coded into it by default, just for starters

Thanks for your feedback, greatly appreciated


If you ask me, it is likely the first metric ever that distinguishes Bitcoin from other currencies and which can be considered actually reflecting real usage (not without reservations, though). Of course, there is also an average number of transactions per day (which has been rising over the last months too, just in case), but it is not as promising in this regard because in the past we had seen massive transaction jams where most transactions were not genuine and created deliberately to congest the network and render it useless

In other words, I don't expect anyone to freeze their bitcoins and open up LN channels just for kicks

they are locked up on the bitcoin network. not spendable on the bitcoin network

then on the separate network called lightning. people then play with unconfirmed/ unaudited 12 decimal transactions pegged to the locked value.

on the separate network known as lightning. the future will be that exchanges will be the co-signer of the main vaults. that way without using the bitcoin network. people can use the separate network to arbitrage 'route' the pegged funds between different different exchanges.
(as long as the 'routes' are online/have funds available/agree on it)

Pretty much, due to the coins being temporarily locked up, it's pretty much almost like a decrease in total supply.

Decent read by the way. Especially that we're in a bear market, I tend to look at the statistics that actually matter for the long term instead; like the percentage increases of lightning nodes and locked up bitcoin. It's been nothing but up in the past months.

I think that the term used describes it correctly

Technically, you can refer to the bitcoins used in LN as locked up or frozen simply because you can't sell them and more generally you can't use them for anything, e.g. to move them from one wallet to another before closing the channel. So, in a sense, they are locked up (as in a safe). Regarding your other point, I don't quite agree with it as you apparently underestimate the psychological effect of that number rising and how fast it rises. In other words, the market won't wait until "it is used by a major business". It will anticipate such use in advance which will reveal itself in price rise. This is how such things work in practice


Right, but it is not the only effect and likely not the strongest one either. You may want to read the OP in its entirety as other posters are recommending

I'm skimming through these walls of text but my take is more coins locked in LN = less coins that are a part of supply and demand on markets, right?