Topic: The Lightning Network FAQ - page 53. (Read 33677 times)

This is more like a real scenario. A $ 1000 channel means that you have to pay the hub $30 per year.
If you make an average of 1 transaction per day, 360 per year, then you will get an average of $30/360 - 8 cents per transaction.
If there are 10 transactions every day, then 0.8 cents. But this is unlikely. After all, if we are considering the option with a single hub, then all your counterparties must be connected to this hub.
8 cents per transaction-this is already comparable to transactions in another blockchain. For example, take dash. There are instant payments that can be made for ~10 cents per transaction. And at the same time, you don't need any centralized hub, you don't need channels, you don't need a third party to replenish the channel. The question is, what will users prefer?

If we want to objectively assess the prospects for LN, we should not look at atypical cases. They don't make the weather.
We need to see how 90% of the standard participants will behave.

For example, how will 90% of customers use LN? How will 90% of sellers use LN?

What will be 90% of the LN network nodes? Is it profitable for these 90% to keep an LN node?

Don't believe the math in the article, because the author is a big block proponent.   Funny.
Unfortunately for you, mathematics is a neutral science.

I have some funds in a Blue wallet that I don't mind exchanging 1:1 for on-chain funds - (you) pay the TX fees on your end and I do likewise.  Having no funds on your end is good as it enables you to have inbound capacity when you open a new channel.

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Just an aside for a previous comment in the thread:

If you have 1 BTC, wouldn't it be better to open 10 X 0.1 channels, or even 100 X 0.01 channels which would make you a mini-hub that others could then start connecting to?

There are several entities which would benefit from a LN node even if their income from LN fees is tiny. The most obvious examples are exchanges and other custodial wallet providers. But there are others, like arbitrageurs (we discussed that some pages ago), but also online merchants (from a certain size upwards).

This would lead, if we take the graphics above, to a scenario closer to the middle one from Fyookball's blog post, but I would argue that these "indirectly profitting nodes" would try to be more well connected than in this example where each one has only 2-3 connections to nearby nodes. So we would have, at the end, a network between the "decentralized" and the "distributed" model, with clearly identifiable hubs, but which would be much better connected than in the example.

This however depends again from popularity of the LN itself (only a few of these entities do not depend from incentives which are related to the size/network effect of LN), which brings us back to the chicken-and-egg problem we discussed in the pages before. Clearly, exchanges could be the "boosters" of LN if they bring the arbitrage business "on board", and this already could mean a significant growth. But for now afaik Bitfinex is the only larger exchange which supports LN fully, so arbitrage via LN still doesn't make sense.

Fyookball isn't an "independent researcher", he's clearly a big blocker and probably a Bitcoin Cash supporter. That's ok for me but his postings (on his blog and here) shouldn't be considered neutral science.

I'll try a more realistic one: how about you get $1000 salary once a month, and pay your normal bills with it? Bills will go from high amounts like your rent to daily small amounts for coffee. Then you indeed can't use the same funds several times. It becomes slightly better if you receive your salary every week. You probably don't want an open channel with your employer (I wouldn't want them to know my remaining balance), so you'll still need a third party.

Again, an unrealistic scenario.

 I (like most users) don't get paid$ 10 many times over the course of a month. I usually only pay$10. After 10 payments, my channel  will be reset to zero. And you will need to either re-create the channel, or replenish it using a third-party service. And this is the fee for an additional  on-chain transaction.

Is it unprofitable to keep an LN node? This means that there will be few nodes, and their number will not grow. What we have now.

Dont eos have around 22 trusted nodes mining everything in a decentralised style way? Id be happy with something like that, or just with the idea that you make a payment regularly with and have a channel open to a local store who would want the fee for processing your transaction...

If santander charged €30 for a transfer I see no reason Deutsche or Lloyd's wouldn't want to try to bring it down to €25 if they can..

3% fees are high - i wouldn't want to pay that much compared to if I could make a bank transfer.

What can I say, I'm an optimist

3% sounds bad if you spend $1000 per month. But if you put $100 in a channel, and spend and receive $10 at a time, but do that 50 times per month, then $3 in fees doesn't sound bad at all! I spent more on my last on-chain Bitcoin transaction (I made a mistake on the fees, my fault).

You're probably right here. But I don't really mind, it's not as if Bitcoin nodes are currently making a profit. Some things are just done to support the network, and if an exchange (or casino) runs a LN-node, earning money from transaction routing is only a side-income, and not their core business.

I must admit I don't have the time to read it in-depth now. But I like this picture:

The thing is: I'm okay with the scenario on the left, if that means I can make many small cheap payments using Bitcoin. I'd prefer a fully decentralized system, but I get that won't happen.

Unfortunately, you are assuming the most fantastic scenario.

The math of LN Economics is pretty poor.

Let's consider the most efficient option: one LN node and many end users connected to this node.  The node must invest the same amount as all users do. If the node wants to earn 3% of the profit for the year, then all users will have to pay this 3%. That is, on average, each user will pay 3% per year of the amount invested in the channel. (The average route length will be 2).

As for me, this already raises doubts about the economic viability of the LN system.

If we consider a more distributed system of LN nodes, the average route length will increase. Accordingly, the investment efficiency will decrease. In order for nodes to earn 3% a year from their invested funds, users will already have to pay 2*3% or even 3*3% of their funds in the channel. The longer the average route length, the higher the coefficient.

"Super-cheap transactions in LN" and "LN-nodes that make a profit" are mutually exclusive things.

In 2017, there was an article dedicated to this issue.
https://medium.com/@jonaldfyookball/mathematical-proof-that-the-lightning-network-cannot-be-a-decentralized-bitcoin-scaling-solution-1b8147650800

Unfortunately, it was ignored by the Bitcoin community. Partly because they couldn't understand the math in the article. But more because the conclusions made in the article were unpleasant for LN fans.

That's it! That's the point! Because if the capital "invested" in LN payment channels could earn you profit, enough to make it have a feasible rate of "investment", then the more sensible thing to do is, leave the "investment" alone and look for another way to buy the new laptop.

Capital is limited. I believe the altruism that boot-strapped LN would be replaced by participants based on incentives.

My point is: you don't need a large balance on a node to be able to make many transactions, as long as you have transactions in both directions.

Yes. It may not have been the best example indeed. Here's another one: I think a node with 1 BTC in LN can process 10 BTC per day in transactions (given the right circumstances). At 0.25% fee that would earn 25 mBTC fees per day. Seeing this numbers makes me think it's not very likely to happen any time soon though, 0.25% is very high. For my last transaction I paid about 0.01% in fee. And that fee is for all nodes involved in the route.
If you can earn 1 mBTC by transfaring 10 BTC per day though a node that holds 1 BTC, it's still a pretty good profit.

And if they are a smaller public node, like one of mine. If they have a need for the BTC someplace else.
I just moved all the funds out of one of nodes because I was to tired to deal with moving some funds out of cold storage.

It's part of the reason why commercial businesses are critical here IMO. They have a plan, they put the funds in and leave them there and keep them balanced.
Unlike Dave who puts them in and plays around and then pulls them to get a new laptop because the charging port on this one is wonky and going to fail sooner or later.

-Dave

I honestly don't understand why that comparison. Plus isn't the 24 hour volume from your link, trading volume, not transaction volume?

Let's compare it to Tether for a moment: it's 24h volume is more than twice it's market cap. Each coin is "used" several times per day. The same will happen for LN-nodes, and the same happens with actual dollar coins and banknotes too.

But payment channels, and their capacity, are actually limited by how much Bitcoin the people who run nodes hold, are limited by how much capital they want to open payment channels with, are limited with their technical-skills in how to maintain the node/balance channels.

That limitation, and increase in demand for LN transactions = higher fees?

Hum, I think I didn't make my question very clear. I'm sorry for that.

I was not looking to know about what happens if I'm offline and someone tries to open/close channels with me.
My question was rather if these down times count to reset the uptime record. I mean, let's say my node has been online non-stop for 12 days and for some reason, my node goes offline, or because mains power failed or because I needed to reboot the node or an other reason, if that record of 12 days is reset or not. Or if what matters is how long channels have been up and running!

If someone wants to close a channel and you're not online, the channel can still be closed anyway.

When not online:
people can't open a channel with you.
people can't cooperatively close a channel with you (so it might take around 14 days for their channels to close unless some sort of override kicks in when you're back online).

I think if an uptime/reliability record is kept, this will be factored into it.

If you stay offline for more than 14 days, someone can technically steal your funds (but I don't think it's likely you'll be offline for 14 consecutive days and you might have bigger problems if that happens).
Other than that, and if i've ever forgot to reload the app within 14 days - the remote node doesn't try to do anything malicious as they're incentivised not to...

Hello,

Do we have any command to check for how long my c-lightning node has been up an running?

Also, if I need to shutdown the node (or restart my laptop), channels remain open and everything keeps working, right?
So, does this off time, counts to kinda break the uptime record?

I mean, my c-lightning node has been running for quite some time now, but sometimes, internet connection goes down because laptop goes to sleep when in battery mode. Or when mains power fails and laptop is not on battery, the node goes down because laptop also shuts down. Does these situations counts as node being offline or what really counts is channels not going offline?

edit oops

If you pm me or bump any thread (yours or mine in the lending section) with a $25 invoice I can try and test it out (though I might have a maintenance margin thing I have to adhere to with my new channels).

I don't have that much in one LN wallet, but I've just tested a $6 (37,500 sat) transaction from Phoenix Wallet (non custodial) to BlueWallet (custodial). This worked without problems, and arrived in seconds. I paid 4 sats in fees.

This seems to be a good moment to reopen my Liberated: LoyceV's Legendary Little Lightning Loans for some more testing

I can't shift $25 via LN except in < $1 transactions.  We're not there yet when it comes to capacity.