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A better question might be: is there really that much demand for Bitcoin payments? If yes, why not make it a custodial protocol to start with to remove all the complexities of a truly decentralized system?

The reasons I ask is because:

1) payments is a highly competitive industry with very low margins, LN will be constantly fighting all the world's banks and payment systems (and musk soon), and it's going to be an uphill battle for LN because it's a decentralized system and fiat solutions are actually reliable and pretty neat UX wise.

2) Non-custodial low-value payments do not have quite the same ring as non-custodial storage of large amounts of value, I fail to see why any kind of censorship resistance is even needed in majority of LN payments.

Satoshis Bridge 2y ago

There are numbers: 5 payments per year and your channel becomes economically reliable.

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Discussion

SBW 2y ago

I assume you mean economically justified to make that channel opening tx.

Compared to what, then?

It will lose to zero fee bank payments I have now.

For my peer, it will lose to lending btc at 2+% return instead of putting them in a channel which does 5 small payments per year.

What is the probability channel will even live that long and not get force-closed?

Satoshis Bridge 2y ago

Compared to onchain fees. That's theoretical numbers derived from papers about payment systems from 1960s. On such timescale LN if compared to legacy payment systems is looking like a frog leaping forward like crazy.

Force closings are problem indeed and it is worrysome that everybody is busy with something not including FC as KPI. But this is free market activity entirely. So we'll, cest la vie.

Dashed line is for hosted channels on this plot. Horizontal axis is payment frequency. Vertical is for economic effect which is difference between onchain and lightning network operational costs.

Satoshis Bridge 2y ago

It is important that you can't compare lending bitcoins, normally, since bitcoins are the best collateral. Lending will always lead to additional risk but in lightning it appears to be measurable while in other cases it is subject to third-party evaluations or collateral asset depreciation against bitcoins.