Author: Hector Chu 2015-08-09 20:14:55
Published on: 2015-08-09T20:14:55+00:00
The Lightning Network is dependent on the assumption that balances can always be settled on the blockchain in case of any issues. However, if the fee on the settlement transactions is not high enough to enter the blockchain, replace-by-fee cannot be done after the fact. This raises the question of whether fees always have to assume worst-case scenarios on the Bitcoin fee market. In a 2015 email thread between Mark Friedenbach and Tom Harding via bitcoin-dev, the former clarified that funds were advanced by the hub on the creation of the channel, and there is no credit involved. If the funds are not already available for Bob to immediately claim his balance, the payment does not go through in the first place. Tom Harding expressed concerns about how Bob would receive money using the Lightning Network. Bob receives payment by applying a contract to his local payment channel, increasing the amount payable to him when the channel is closed. There are two possible sources of funding for Bob's increased claim: a deposit from Bob's payment hub, or Bob's previous spends. The former involves a third-party dependency absent with plain old bitcoin, and it comes with a fee that is worse than the current banking system. The latter incentivizes centralization, as Bob has an incentive to consolidate spending and income in the same payment channel. All in all, the Lightning Network requires a powerful middleman for effective sending and receiving of money, which some may find uninteresting.
Updated on: 2023-06-10T19:02:17.790026+00:00