Published on: 2015-07-10T02:55:15+00:00
Gavin Andresen, an influential figure in the Bitcoin community, expressed skepticism about the use of the Lightning Network for everyday transactions. He believed that very few personal Bitcoin or dollar transactions fit the use case that the Lightning Network is designed to solve. While he acknowledged its potential for innovation in micropayments and hourly worker payments, he did not see it as a scaling solution for the current types of payments handled by the Bitcoin network. He also raised concerns about centralization, particularly with payment channels between big financial institutions.The Lightning Network is a proposed solution to the scalability problem in Bitcoin transactions. It allows participants to send and receive coins through various hub connections without on-chain settlements. Each channel has a pseudonymous identity and can be closed when funds are needed for non-lightning reasons. The network has been described as a write coalescing write cache layer for Bitcoin. However, there are significant problems with the concept of hubs, including questions about knowledge, incentives, and complexity reduction. Despite being an interesting idea, the Lightning Network is still far from actual implementation.A discussion on Bitcoin scaling took place in 2015, where Benjamin expressed concerns about naive scaling and suggested working incrementally and carefully. Adam disagreed and explained how the Lightning Network works, stating that every lightning transaction is a valid bitcoin transaction. Adam clarified that lightning is expected to be peer-to-peer like Bitcoin.Decentralization is a crucial aspect of Bitcoin, and measuring its level can be challenging. The concept of pooling protocols can help phase out artificial centralization, but claims about decentralization often lack analysis or explanation. To improve discussions on changes, it is suggested to develop a metric for measuring decentralization.The author agrees that scaling Bitcoin in a naive way could have negative outcomes but acknowledges its advantages in not changing the original system. They express skepticism towards Level2 and Lightning solutions, stating that even if money is moved within the constraints of a locked contract, it does not solve the issues with off-chain transactions. The author argues that moving between off-chain and on-chain requires liquidity and a pricing mechanism, which is a problem similar to side-chains. Additionally, off-chain transactions on an exchange are subject to KYC/AML regulations.In a forum post, Raystonn explains that nodes are limited to 133 connections, and the load is only affected by transaction rate, not by the number of connections. There have been concerns about larger blocks resulting in exponential growth of work, but this is based on a wrong assumption. Decentralization is crucial for Bitcoin's security properties, and simplistic thinking about an ever-increasing block size is destructive. Improvement can be achieved through bandwidth and relay enhancements and pooling protocols to phase out artificial centralization.In an email conversation, Jameson Lopp and Peter Todd discuss Bitcoin scaling. Lopp argues that for Bitcoin to have O(n) scaling, the number of validation nodes must remain constant with the number of users. Todd disagrees, stating that it doesn't matter what the total work of the network is, as participants only care about the resources required to run their own node. He points out that the number of nodes is inversely proportional to the number of users, which presents a significant problem. O(n^2) scaling means that as Bitcoin is adopted more widely, it becomes harder to use in a decentralized way without trusting others.Another email conversation between Peter Todd and Michael Naber addresses global network consensus in Bitcoin. Naber questions whether off-chain solutions like hub-and-spoke payment channels and the Lightning network provide global network consensus. Todd explains that these solutions are actually more efficient ways of using on-chain transactions and enable economic transactions without any blockchain transactions. He asserts that Bitcoin Core scales with O(N), and achieving O(n) scaling would require a trust-based system. Todd suggests building a trust-based system on top of Bitcoin's global consensus functionality.The discussion on the Bitcoin development mailing list revolves around the fee market and its comparison to other markets. While there is no assured quality of service in the Bitcoin fee market, this is not uncommon in other financial markets. The comparison is made to a market maker's order book, but in Bitcoin, it is difficult to know how miners are positioning themselves at any given moment. The author suggests that establishing a feedback loop through auctions with increasing increments could settle demand and supply. However, adapting supply remains a challenge for resolving capacity problems.In an email exchange, Benjamin expresses doubts about the capacity and functioning of the Bitcoin system. He argues that there is no supply and demand mechanism that would allow users to adapt fees and receive different qualities of service based on current capacity. Peter Todd counters this claim by stating that Bitcoin already operates based on supply and demand. Fees can be adapted to obtain different qualities of service depending on capacity. Todd refers Benjamin to his article on how transaction fees work for more details.Bitcoin Core aims to solve the global consensus problem, but there are ongoing discussions about raising the block size and meeting the demand for high-capacity global consensus.
Updated on: 2023-08-01T14:03:11.909501+00:00