Thursday, February 22, 2024

The Lightning Network, initially seen as a solution for scaling Bitcoin non-custodially, is facing challenges due to high fees, causing concerns about the ability to cost-effectively open channels or enforce hung payments on-chain. This has led to speculations about the network’s future and whether platforms like Coinbase or Cashapp might be more suitable for Bitcoin transactions in a high fee environment.

However, the original Lightning Network whitepaper highlighted these challenges, such as the need for 133 MB blocks for 7 billion people to open two channels a year and the risks associated with improper timelocks and forced expiration spam. These concerns were outlined in the paper and are not new realizations. The paper also addressed data loss and the need for watchtowers to mitigate these risks, as well as the inability to coordinate soft forks.

It’s important to note that the blockchain itself faced similar challenges with scaling limits and the debate over the cost effectiveness of on-chain transactions, leading to the blocksize war. The expectation that all transactions should be confirmed on-chain at a cost-effective fee rate was misjudged, just as the idea that Lightning Network should handle all coffee payments without facing any challenges.

Ultimately, Lightning Network has its own set of problems, such as enforcing low-value payments on-chain, which can be addressed through solutions like packetized payments. While these challenges are not new, they are part of the evolving ecosystem of Bitcoin that requires careful consideration and adaptation.

The concerns surrounding Lightning Network must be viewed in the context of historical warnings and previous debates within the Bitcoin community, rather than as entirely new and unprecedented issues. Addressing these challenges will require a realistic and informed perspective, taking into account both the strengths and limitations of the technology.

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