Replying to FinnStin

I generally agree with this sentiment, but there is a concern with Lightning.

Your funds should always be safe on Lightning if you are diligent, but your channels can be closed at any time.

The counterparty risk isn't in losing the funds, but rather in losing payment paths.

Because I'm stupidly bullish on Bitcoin, I am somewhat concerned about on-chain fees getting so high that opening even a single Lightning channel becomes out of reach for most people.

Losing that channel once you do have it could be devastating, and so who is going to take the risk of opening a channel with you? Who would you trust to keep a channel open?

At some point, the expense might render running a self-sovereign and well-connected Lightning node a privilege of very large institutions. Less well-connected nodes may rely on having a channel with one of these large institutions to have access to reliable payments. That reliance could obviously be abused.

I'm sure more scaling layers will come, and there are a few here already. It'll probably work itself out. But we do need something more than the current state of Lightning.
0b
nobody 2y ago

Ok, I got your point. I don't feel afraid of Lightning being abused by major institutions, because L1 is open and permissionless, so there will always be an open financial market. You'll never have to put your money in the hands of people you don't trust. Reputation will matter.

Reply to this note

Please Login to reply.

Discussion

ed
FinnStin 2y ago

I believe you are right. Reputation will likely be very important on Lightning.

You're probably right that the open nature of L1 makes abusing L2 much harder. The more pressing concern I have is that if an individual doesn't have the future equivalent of a good credit score, the large institutions may not wish to take a risk on them. This isn't malice, it's risk management.

Eltoo channel factories would probably make reputationeven more important. They do allow for even cheaper payments in theory, possibly alleviating the burden of holding your own keys, but now the trust model expands to more than one counterparty. One person could refuse to sign new balances and potentially force close a channel factory with twenty individuals.

The politics of managing nested multi-party payment channels is even more messy.