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Topic: The Lightning Network FAQ - page 54. (Read 33677 times)

LoyceV

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Quote from: jackg on November 15, 2020, 03:18:35 AM

Quote from: Wind_FURY on November 15, 2020, 03:09:41 AM

I was talking more about on-chain, limited block space, if higher tx demand = higher fees. Off-chain, limited capital available, therefore limited payment channels, if higher tx demand = higher fees.

I can't decide if this makes sense or if its just me, could you rephrase it?

I don't think it makes sense Tongue

Nodes will always be limited in funds, but they can send the funds they have back and forth many times. Nodes may require balancing at some point, if all their funds are "on one side" of their channels, but that can be done by adjusting fees: if there's a lot of funds on one side, routing could even be free as it helps the node. If there's not much funds left, fees can be high to encourage routes to pass through a node that has a better balance.

More demand will lead to more nodes, which gives more possible routes:
Image loading...

(Source: Visualisers of the Lightning Network)

Maybe it's better to compare LN with for instance mobile phone prices, and not with for instance oil prices. With oil, a higher demand leads to a higher price. With phones, producing a billion of them makes them a lot cheaper than producing only 1000.
I'd love to see how LN performs at a billion transactions per day Cheesy

jackg

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https://bit.ly/387FXHi lightning theory

Quote from: Wind_FURY on November 15, 2020, 03:09:41 AM

I was talking more about on-chain, limited block space, if higher tx demand = higher fees. Off-chain, limited capital available, therefore limited payment channels, if higher tx demand = higher fees.

I can't decide if this makes sense or if its just me, could you rephrase it?

There isn't a limited number of channels. When you open a channel you make a literal contract between you and the other nodes. If a node ups it's fees you'd just use a different node... Iff a payment processor or merchant charges too much for fees you'd just turn to a different one imo or complain to them and see if they'll reduce it (if your channel is open with them).

This is obviously different when using a custodial wallet but you don't have to use a custodial wallet and I'd the fees become too high then competition will likely increase...

Wind_FURY

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Quote from: LoyceV on November 14, 2020, 05:50:06 AM

Quote from: Wind_FURY on November 14, 2020, 04:36:40 AM

Quote from: LoyceV on November 13, 2020, 10:30:33 AM

Unlike on-chain transactions, off-chain transactions aren't limited in capacity, so market mechanisms should lead to an equilibrium between cost and profit. If fees go up a lot, new parties can join the LN-routing-market and fees will go down again until there's a new equilibrium.

Isn't that the same as mining, hashing power, and demand? Because offchain channels are also as limited as the amount of capital, the Bitcoins held, the users have.

No amount of hashing power, capital or earnings per block can increase the number of transactions Bitcoin can process (I'm ignoring small fluctuations until the next difficulty adjustment).

With LN, anyone with some coins can set up a node, which increases the number of available routes. The new node will need to connect to some nodes (or users). I've seen several offers from node-owners that pay to open a channel with them.

I was talking more about on-chain, limited block space, if higher tx demand = higher fees. Off-chain, limited capital available, therefore limited payment channels, if higher tx demand = higher fees.

LoyceV

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Quote from: Wind_FURY on November 14, 2020, 04:36:40 AM

Quote from: LoyceV on November 13, 2020, 10:30:33 AM

Isn't that the same as mining, hashing power, and demand? Because offchain channels are also as limited as the amount of capital, the Bitcoins held, the users have.

No amount of hashing power, capital or earnings per block can increase the number of transactions Bitcoin can process (I'm ignoring small fluctuations until the next difficulty adjustment).
With LN, anyone with some coins can set up a node, which increases the number of available routes. The new node will need to connect to some nodes (or users). I've seen several offers from node-owners that pay to open a channel with them.

Wind_FURY

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Quote from: LoyceV on November 13, 2020, 10:30:33 AM

Quote from: Wind_FURY on November 13, 2020, 09:58:15 AM

Then if adopted, will the Lightning Network's fees not be "unfairly cheap" forever?

Isn't that the same as mining, hashing power, and demand? Because offchain channels are also as limited as the amount of capital, the Bitcoins held, the users have.

Quote

Is there some truth to what some people said that LN fees might be more than some altcoins' fees, because of limited capital, opportunity cost, and demand?

Yes

An XLM transaction for instance costs 0.00001 XLM, which is about $0.0000008 or 5 msat (0.00000000005 BTC). There's no chance and no need for Bitcoin to compete with this, because it's Bitcoin, and not some altcoin.

The "centralized shitcoin, with the broken incentives" comparison, but I understand your point. Cool

LoyceV

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Quote from: Wind_FURY on November 13, 2020, 09:58:15 AM

Then if adopted, will the Lightning Network's fees not be "unfairly cheap" forever?

Quote

Is there some truth to what some people said that LN fees might be more than some altcoins' fees, because of limited capital, opportunity cost, and demand?

Yes

Wind_FURY

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Quote from: DaveF on November 13, 2020, 09:37:55 AM

Quote from: LoyceV on November 13, 2020, 06:57:54 AM

Quote from: Wind_FURY on November 13, 2020, 06:21:16 AM

Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

I don't think they care about earning 0.2 BTC in several months, or 0.25% on withdrawing small transactions (they earn much more from the common 0.5 mBTC withdrawal fee).

And beyond that there will be time & infrastructure costs.
Unlike most of us, since they will be a bit more concerned with security (I hope...) their node is not going to be run on an RPi that was sitting around or a VM on a random desktop machine that has enough power to do it.
Going to need hardware, someone who knows what they are doing, redundancy, etc.

Going to be tough to justify the cost vs. profit.

-Dave

Then if adopted, will the Lightning Network's fees not be "unfairly cheap" forever? Is there some truth to what some people said that LN fees might be more than some altcoins' fees, because of limited capital, opportunity cost, and demand?

DaveF

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Quote from: LoyceV on November 13, 2020, 06:57:54 AM

Quote from: Wind_FURY on November 13, 2020, 06:21:16 AM

Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

I don't think they care about earning 0.2 BTC in several months, or 0.25% on withdrawing small transactions (they earn much more from the common 0.5 mBTC withdrawal fee).

LoyceV

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Quote from: Wind_FURY on November 13, 2020, 06:21:16 AM

Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

I don't think they care about earning 0.2 BTC in several months, or 0.25% on withdrawing small transactions (they earn much more from the common 0.5 mBTC withdrawal fee).

Wind_FURY

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Quote from: ?? on ??

Quote from: Wind_FURY on November 13, 2020, 01:05:49 AM

Then how did Alex Bosworth reach $2,500 in routing fee earnings?

That much should be obvious, he's CEO of https://yalls.org/, which sometimes used to try LN first time. Even myself have tried it previously, even though i use testnet edition few years ago.

Simply have lots of capital isn't enough, there should be reason why i should connect to your channel. People is more likely to create new channel when they pay for service or goods.

So simply, he's earning by leveraging his company, yalls.org, to have as much connections as it can? Why aren't exchanges starting to run/operate their own Lightning nodes? The incentive is there.

Wind_FURY

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Quote from: LoyceV on November 12, 2020, 12:51:34 PM

Quote from: darosior on November 08, 2020, 09:12:40 AM

Quote from: LoyceV on November 08, 2020, 06:07:32 AM

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

But..... How far is the current Lightning Network from being completely distributed? I get that it's theoretically possible, just like it's possible to send a letter from A to B without using a centralized distribution center, but I'd expect a few large nodes to handle the majority of transactions because it's much more efficient that way.

Plus only a few large nodes can handle the costs, and handle the opportunity costs by earning them back in fees.

Quote from: Wind_FURY on November 12, 2020, 11:12:42 AM

https://twitter.com/alexbosworth/status/1318778737228349440

Quote

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

That's 0.25% fee on average, not bad for small transactions (paying 5 sat to send 2000 sat), but if you're sending a few mBTC, on-chain fees can be lower already.

From what I've seen so far, this is much more likely:

Quote

Realistically I have earned 326 Satoshi over the last two years

Then how did Alex Bosworth reach $2,500 in routing fee earnings?

I believe it was darosior who also said that he earns enough to pay for his monthly costs for running his node. What is the secret? Cool

LoyceV

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Quote from: darosior on November 08, 2020, 09:12:40 AM

Quote from: LoyceV on November 08, 2020, 06:07:32 AM

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

Quote from: Wind_FURY on November 12, 2020, 11:12:42 AM

https://twitter.com/alexbosworth/status/1318778737228349440

Quote

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

Quote

Realistically I have earned 326 Satoshi over the last two years

Wind_FURY

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OK Lightning hobbyists/experts, teach us plebs the art of running a Lightning node, FOR PROFIT. Don't keep it to yourselves! Cool

Make a simple guide for newbies?

https://twitter.com/alexbosworth/status/1318778737228349440

Quote

Today my nodes reached 0.21 BTC (currently $2,500) in routing fee earnings, on 83 (currently $1,000,000) of forwarded BTC.

darosior

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Quote from: LoyceV on November 08, 2020, 06:07:32 AM

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

That's just plain wrong. The Lightning Network is completely distributed at its core.

It may be right for some services built on top of the Lightning Network, such as mobile wallet providers easing the flow by providing a gossip source or even a custodial wallet.
But that must not be assimilated to the Lightning Network as defined. There were some previous models based on an *actual* hub-and-spoke architecture for payment channels, and they are very different from the Lightning Network.

LoyceV

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Quote from: Pmalek on November 08, 2020, 05:35:09 AM

How is the connection strength and the connectivity measured? Are there stats that one could look at before deciding which route to take to make sure that the payment goes through?

I'm not sure.

Quote

Apparently it can happen that a payment doesn't go through. Is there a reason it's made this way

LN is a bit like a spoke-hub: instead of making a connection from anywhere to anywhere, everyone makes only a few connections.

Quote

and not like regular Bitcoin transactions, where everyone can send to every other person on the world?

That exists already Wink

You can of course just use a normal on-chain Bitcoin transaction.
The problem with this is scalability: currently every Bitcoin node sees all transactions. That works fine for a few transactions per second. LN will be able to handle much larger transaction volumes, without storing all transaction data on the blockchain forever.

Pmalek

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Quote from: LoyceV on November 07, 2020, 04:37:56 AM

Snip

How is the connection strength and the connectivity measured? Are there stats that one could look at before deciding which route to take to make sure that the payment goes through? Apparently it can happen that a payment doesn't go through. Is there a reason it's made this way and not like regular Bitcoin transactions, where everyone can send to every other person on the world?

LoyceV

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Quote from: Timelord2067 on November 07, 2020, 05:46:01 AM

Just ensure you write down the 24 word mnemonic seed passwords/phrase in a secure location when prompted to do so (and create an on-chain wallet first *and then* create a Lightning Wallet)

In BlueWallet, you can create a LN wallet without creating an on-chain wallet. The LN-wallet uses a different backup system.

Here's a BlueWallet LN backup holding 100 sats:

Code:

lndhub://667c9c47fa0ac23c2844:11c65745b9b050dd731b

First one to restore this backup can move it to his own wallet.
Warning: don't use this wallet to receive funds, it's obviously compromised.

Timelord2067

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Quote from: Rath_ on November 07, 2020, 04:39:42 AM

That's why Loyce suggested using a custodial wallet. BlueWallet doesn't require you to open your own channels. You can start receiving coins over the Lightning Network right after you create a wallet. You don't have to worry about inbound/outbound liquidity since it's managed by someone else.

Just ensure you write down the 24 word mnemonic seed passwords/phrase in a secure location when prompted to do so (and create an on-chain wallet first *and then* create a Lightning Wallet)

Rath_

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Quote from: Pmalek on November 07, 2020, 04:27:00 AM

I would then be able to make a direct connection with the grocery store without going to any other node?

That's correct.

Quote from: Pmalek on November 07, 2020, 04:27:00 AM

I understand that this is a a test you are suggesting.. I am just saying that using LN for an one time thing doesn't save on fees or improves the speed of confirmation.

LoyceV

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Quote from: Pmalek on November 07, 2020, 04:27:00 AM

For the sake of simplicity, let's say they aren't using a third-party for their payment needs, and will keep the Bitcoin. I would then be able to make a direct connection with the grocery store without going to any other node?

Yes.
And if the grocery store's node is well-connected, you'll be able to pay your local bookstore too without opening another channel.

Quote

I am just saying that using LN for an one time thing doesn't save on fees or improves the speed of confirmation.

I think of LN as a Bitcoin niche market: it's still small, but has the potential to grow a lot. My one time testing lead to currently having several wallets installed, each with a few bucks worth of LN sats in there. Whenever a site (such as a webhost) accepts LN, I use it to help increase it's usage.