Topic: The Lightning Network FAQ - page 52. (Read 33677 times)

Don't drag me into this about profit.
I don't run any of my nodes expecting a profit.

I just pointed out the fact that since there is no profit to be made that people are not going to treat it like a business.

I pulled my funds from all my nodes without a thought because I wanted to spend the BTC on something else. And since there is no real profit to me made, it was just easier for me to do that then pulling from cold storage.

bitrefill / ln.pizza / etc. they are businesses and run their LN nodes as such.
99% of everyone here is an enthusiast / hobbyist / tech nerd and run their nodes as such.

Case in point. As of now I am going to refill one of my nodes. On chain fees are above 50 sat/vB
Guess what, I am not going to start to refill till they drop a bit over the weekend.

A business can't play that game if they have to move on chain funds to open / close / do something else with a channel. They eat the fee and open it now.

-Dave

yes, but that didn't stop you and DaveF lamenting the fact that profit is a canard up-thread, made more painful by clinging to the possibility that you could compete seriously

I've said it before, but I'll say it again: the market dynamics of the LN are an absolute race to the bottom: if anyone tries to charge higher fees than their operating costs, some upstart will try to undercut them, in the belief that they can push their competitor/s out of the marketplace by running at a loss "short term". This will probably be a mistake, but it won't stop them trying. When everyone wants to participate (because fast cheap transactions), there will always be transactions to route, and always a procession of people thinking they can use routing as a way to earn income... and people with alot of BTC in channels that want to troll such profit-seekers by undermining their ability to make any money. Thusly, the margins are cut to nothing, and the balance of routing rewards trends to zero.

Sorry to burst the bubble, but I think that secretly, you already knew. Really though, what's not to like?

For the sake of debate. Don't you believe that those two, "profit as a canard", and "taking the competing part seriously" are contradictory?

Plus consider that LN routing supply is limited by the capital one holds. It has to be for profit to grow capital, and compete more effectively.

I totally agree with this, however, it could be assumed that the new user who only has one active channel (to the coffee shop) is probably going to *just* be buying a coffee and bagel a dozen times with what they opened the channel with.  They *might* open a second channel once the first is empty/near empty, which would then give them inbound+outbound on their portable device via two channels.

Correct thinking. Just by thinking about it for a while, you can understand that neither the buyer nor the seller can benefit from creating a direct channel between them.
It is profitable for the buyer to make 1 channel to a large reliable node that has channels to other large nodes. This makes it possible to use LN for purchases from any seller.
It is also profitable for the seller to make  1 thick  channel with a large node in order to receive payments from all buyers through it, and use the amount collected inside the channel for their purchases or for selling on the exchange.

They wouldn't open a direct channel because they can pay via existing channels... but it should be emphasized that funds in a channel aren't "paid".  If they create a channel to the coffee shop with 100 cups of coffee worth of funds, they can use those funds for whatever still.  They can close the channel to move the funds offline or they can pay payments to other people using those funds, routing across the coffee shop.

Makes me wonder how many customers would be willing to pay 10 or 100 cups of coffee up front to fund their channel. I don't expect direct channels (where you don't pay any routing fees) to become a big thing.

Stupid question. Has anyone written a script or any kind of monitoring that will alert you if your LN node is down?
I have been running around dealing with some family & work stuff all week and only now noticed after 3+ days that my office node was down.
Did not try to spend anything and was not in the office to see it so it has just been sitting there offline.

-Dave

You've just reminded me there is/was a small group of takeaway cafes in Fortitude Valley that were trading in Crypto, I went down the Valley a while back (prob two years ago now) and they bamboozled me with wanting me to connect to them *and then* make a purchase with crypto.  I'm wondering now if they were early LN adopters (and I'm also wondering why I haven't been back in all that time??)

Things are almost back to normal with just one or two active cases, so if those shops survived our mini lock-down (some didn't) then I should go check them out and report back.

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Also LN related to above I can't envisage rocking up to a coffee shop and creating a channel to said shop to then buy a cup of Joe (giving the shop a small amount of inbound and outbound capacity) - unless of course you were planing on being a regular customer as confirmation time to open a channel will be an initial issue.

I think we can agree to disagree here. I like to be able to buy a coffee with Bitcoin, and it's possible here. Also with LN for much less fees on said coffee.

Just because someone is developing a product doesn't mean that the product will be successful. All developers believe in their product, and all hope that they will be a great success. But only a few out of hundreds achieve success.  
It took me a couple of days to understand how cool Bitcoin is. But I spent about six months intermittently on LN, but I still didn't understand what the optimism of LN developers is based on. There are too many unavoidable design flaws. My experience and my intuition tell me that LN has ~1% chance of great success.

Do you draw an optimistic conclusion from each fact? The ranks of fools with money and fans with money are not so numerous.
The user doesn't need LN. The custodial service needs LN.  If your external recipient also uses a custodial service, then they don't need LN either. And two custodial services can agree among themselves and without any LN. Why would they invest heavily in a particular channel? The way banks work with each other now.

"profit" is a canard imo.

With Lightning, you have access to cheap, anonymous transactions. If you break even on routing fees, that's a pretty good outcome.

LN routing supply is market driven, because it's an open competition. Therefore, you can expect some people to take the competing part seriously, and so try to be better at routing than others. The key point is that this cannot lead to monopolization while the ability to compete remains open, and so fees will be pushed as low as routing nodes can tolerate. I expect many will figure out some way to run at a marginal loss, and recoup the costs some other way (e.g. miners/pools are well positioned to run loss-making LN nodes, as they're the ones confirming the open/close transactions on chain in the first instance).

I'm basically just speculating here. But I do know many people believe in LN. Why else would there already be so many different wallets out there, some with very active development?

If fools and fans make LN grow, I'm okay with that

That's not true. Any exchange, casino or random website can create their own custodial "tipping service". The great thing from making a LN custodial service is that it also works externally. BlueWallet for instance is custodial, if I make a payment to another BlueWallet user, nothing happens on the Lightning Network. But I can use the same wallet to make an external payment too. Without that, there wouldn't be any use for this wallet.

It's there in the responses of the blog. I remember Bram Cohen had something to say about it on Twitter as well. I will try to find it.

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I was looking for hardware for Lightning, someone recommended this, https://store.start9labs.com/collections/embassy

Does anyone have reviews?

You have an interesting way to lead a discussion. First, say that it will be more realistic if the hubs earn less. But then you claim that this will not happen, because few people will risk for a small profit and pull their funds from a cold wallet to a hot wallet that is connected to the Internet, and all the keys on this computer are open .
Either fools or fans will risk their money for a profit of less than 1% per year.
What a scoundrel.

It depends Opening 100 channels eats up on-chain fees. One large channel with a well-connected node saves those fees.

Maybe it's more realistic the hub won't earn $30 per year from a $1000 investment. It's not as if there's a shortage of people hodling Bitcoin, but the problem (and that may be a much bigger problem) is that LN-nodes can't use cold storage. If you have 1000 Bitcoin and you could safely increase your stash by running a LN-hub, you wouldn't mind if the revenue is small. It's still better than nothing. But switching from cold storage to a hot node isn't going to happen for a small profit.

Please fix your quote, that's not my text.

These are not atypical cases. They're the majority of the larger service providers I mentioned - in the case LN is popular and successful. I should have written "there are several categories of entities" instead -  I am sure you also did understand it that way (but my non-native English may have given you the opportunity for this "answer") And no, we don't need 90% to be "profitable" in the sense that they make money charging fees. It is enough if the money they save in comparison to on-chain fees, all costs (opening/closing channels etc.) included, is > 0.

His calculations may be correct but he then tries to "use" them to prove his point (which he has sustained during years here in this forum) that LN is not viable. And this exceeds the field of mathematics but enters the field of politics.

If you had read my post completely, you may have seen that I even agree with him that a completely distributed LN where most participants are well-connected, without hubs, is probably very difficult to achieve (and would also not be necessary, imo). But Fyookball didn't address the point that there are many entities who are incentived to run well-connected mini-hub nodes without having to profit directly from them. Their profits come not primarily from the fees they earn, but from the fees they save.

(I will not continue this discussion cluttering the thread, but leave it again for more technical FAQs.)

Of course I read this blog.

Look carefully at the phrase at the end:
In fact, the author of this comment just couldn't understand the article.

The article considers a different model ( in the form of a tree), because this model should give the best results. It does not state that LN will have a model in the form of a tree. And if even for the most optimal model we get bad results, then for all other models, the results will be even worse. This is a standard technique in mathematics.

I don't recall Bram Cohen's comment. Could you give a link to this comment. If in addition to the word "stupid" there are real arguments.

Was it? Did you read the comments/replies?

One of them cared enough to wrote a blog of his own after reading Jonald Fyookball's blog, https://medium.com/@murchandamus/i-have-just-read-jonald-fyookballs-article-https-medium-com-jonaldfyookball-mathematical-fd112d13737a

There was Bram Cohen in the comments too, and challenged the math, and called Joland Fyookball "stupid".

Contrary to popular belief, numbers can lie if you're clever about it.  How else do you explain companies cooking the books on their accounting or the popular expression "lies, damn lies and statistics".

The question always becomes "what numbers did they deliberately leave out"?

I'm sure a fraud like Faketoshi would insist that his numbers add up too, but we know better.    

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//EDIT:  Apologies LoyceV.  I need to stop using my phone when replying to multi-quote posts, heh.  Too easy to select the wrong text on touchscreen devices.