Why Lightning Network Sucks Balls
Aug 29, 2019
I'm sure you're asking why must I keep bashing on Bitcoin all the time?? Why don't I shit XRP rainbows any more like the good old days dammit? Believe me, I take no joy in bashing Bitcoin, but I think of it as my civic (monetary) duty to inform (defeat), and right now the greatest lie ever told continues to be the Bitcoin Ponzi, taking so much money from the poor shleps that just do whatever the fake news stories tell them to. This isn't fun for me, it sucks, but someone has to do it. (Fuck, I'm going to enjoy this..) This final installment (assault?) on Lightning Network should wrap it up though and I'll get back to XRP as my focus.
Bitcoin, Bitcoin, Bitcoin... all I ever hear about from the mainstream media is Bitcoin. Why? WHY? Because of the POPULIST DREAM it sells to the sheeple:
The allure of easy money from mining or the incredible historically-demonstrated appreciation
The security of knowing nobody can take your money from you (If you pretend China can't)
The pseudoanonymity of being able to conduct your business without the tax-man's/spouse's/law's prying eyes
The unlimited amount of money that can be hidden safely away
The ability to send any amount of money to anybody anywhere in the world, not exactly quickly or cheaply, but better than legacy systems by a long shot
Unilateral payments, meaning you can send money to someone's address and they don't have to do a thing
Good censorship resistance so coins are all treated equally/fungibly (if you ignore China's pools), meaning generally nobody can stop or delay your payments (Except that fucking China can)
But then there's also the cray-cray virtues not based in reality, such as:
Bitcoin can be a one-world currency
It will eliminate the need for banks, because Bitcoiners hate banks
Banks will eventually adopt Bitcoin, even though Bitcoiners hate banks
The blind belief that Bitcoin's major shortcomings can be fixed
These are the major selling points that keep the sheeple coming back for more Bitcoins. Not the reality, but the dream...
Truth is, compared to some of the truly high-performance coins out there (yes I'm referring to XRP), Bitcoin's technical virtues don't seem to be competitive at all, to the point that even the most die-hard Bitcoin maxis are fumbling to cover for Bitcoin's shortcomings. If only there was a magic trick they could pull to make all the Bitcoin technical shortcomings go away!
Enter Lightning Network.
Wait a minute, let's do that right.
Ladies and Gentlemen!! WELCOME TO THE GREATEST SHOW ON EARTH!!!
LIGHTNINNNNNNG
NETWOORRRRRKKKKK
{Crowd goes wild! Roar!! People losing their minds, screaming in ecstasy, ripping their clothes off, digging up graves, madness!}
I have never seen anything so oversimplified, misunderstood, and overhyped since Bitcoin in my life; JFC, it's literally a circus.
Coming back to the technically-illiterate Bitcoin maxis, I have to admit that a LOT of them seem to be capitulating on the idea that Bitcoin is immortal; occasionally slipping a confession or two that they're aware of the possible shortcomings in Bitcoin HOWEVER, it always comes with the caveat that, "But Lightning Network will fix that!".
Will it now?
What is Lightning Network (LN) exactly?
LN is what's called a "second-layer" solution to a problem that doesn't seem solvable or practical on the "first-layer". The Bitcoin blockchain is a "first-layer", and it hasn't evolved in any significant way that addressess the technical challenges it faces, such as limited scaling, high fees, slow transactions, centralization into pools, Chinese-govt exposure, etc. While not all of these problems can be solved by a second layer, on the surface, it seems that LN has been developed to facilitate the following:
Improved speed of payments
Lowered cost of payments
Great! And it works. Anecdotal recounts paint a picture of exceptionally quick Bitcoin payments, and even more palatable low fees. Lots of high-profile advocates. Seems a wild success, particularly to those that stop reading after this mandatory layman's introduction. Go ahead, read it if you're new to LN, I won't repeat what's in it because that's been done in hundreds of other articles. I'm only here to gut LN, not teach about it.
Ok, great, faster, cheaper payments with Bitcoin now seem possible..EXCEPT.. what compromises are being made? That's where I come in to fuck it up for you.
What Lightning Network DOESN'T fix in Bitcoin
On-chain scaling (first-layer) - this is important because there are some Bitcoin transactions that just don't make sense on the LN, such as one-time P2P payments. This means despite that there could be a lot of payments made through the LN, the LN-incompatible payments and LN-channel-opening and settlement payments will still hit the Bitcoin blockchain directly, and will still increase the fees and delays on-chain. In other words, LN just buys time for Bitcoin, it doesn't solve the scaling problem.
Pool centralization in China - Bitcoin remains fully exposed to destruction by China, and LN does nothing to fix or protect from that.
Greed-motivated governance - Bitcoin sucks today because the miners are making too much money from how shitty it is that they won't allow the changes it needs to happen. LN doesn't change any of that, Bitcoin evolution will continue to be stunted.
Horrific mining energy consumption - The unforgivable energy waste of Bitcoin's hashing algorithm will continue unabated, perpetually climbing. LN, if anything, contributes to this environmental disaster, simply by further promoting this ancient crypto
Cons about the Lightning Network itself
1) Prefunding
Yes, you need to open an 'channel' by placing Bitcoins in a special setup between you and a LN node operator, where your coins are considered locked from both of you, but with the option of you allowing portions of that locked amount to be dedicated to the LN Node operator. Simply put, you (admittedly trustlessly) prefund a channel to someone else's LN node paying an upfront on-chain payment normal fee to get it there, tying up those funds until you spend them on the LN. This may not seem a big deal, but if for some reason you need to get those funds out, you have to close the channel and then pay yet another on-chain fee to have the remaining Bitcoins returned to your address. That's right, at least two on-chain payments to effectively use LN.
2) Complexity to set up or integrate
Everybody has their own definition of what seems complex or not, but I don't think 'relative' complexity is nearly as subjective. What I mean by this, is even if someone wouldn't have any trouble at all with a certain degree of complexity, there will always be those that don't quite grasp it. As complexity goes up, less people can manage it, and it suffers from lack of adoption. It's inarguable that LN is MORE complex than just using Bitcoin, because LN is additional complexity on top of Bitcoin.
3) Creates a nostro/vostro system
Here's the important part: LN node operators need to provide the 'liquidity' to make the network..work. By this I mean, you can't just pump a million bitcoins through the LN, there has to be a path in the LN that has a million bitcoins worth of liquidity in order for that value to make it through to the destination. LN operators have to stock their nodes with lots of Bitcoins, and if they don't have enough, they are limited in the maximum transfer size they can facilitate
4) Both Sender and Receiver have to be online in order for a payment to go through
Whut? How does that seem practical? Serious pain in the ass, particularly for P2P
5) Limited transaction size
Despite some meaningful growth in the LN node count, the actual funds available for liquidity has stagnated. Average LN Nodes can only handle payments in the $100 range. Doesn't seem to be improving in the past 5-6 months. There are arguments that there are hidden nodes that have additional liquidity. There are also compelling arguments that leprechauns hide pots of gold at the end of my ass.
6) De-anonymizing
Node operators know your IP addresses, harvesting personal data including balances and physical location (robbery risk). Sure you could use TOR, if you knew what the fuck that was. Isn't this about bringing the glory of Bitcoin to the mainstream? How many PhD's is the average person going to need to use it?
7) Regulation is looming
With certainty, LN nodes will soon have to adhere to the very same Money Transmitter registration process that all money-conduit businesses do, and they will have to adhere to regulations, KYC, AML, etc. Do you really think the government is going to continue to let these well-known LN nodes transmit money without a license? Do you really think the vast majority of these enthusiast node operators want to go through all that Money Transmitter requirements tedium just to make a few bucks? Which brings me to..
8) LN Node operators make fuck all
Enthusiasts are not philanthropists. The real-world experience of being a LN operator is quite illuminating. Running 24/7 servers costs money, as do constantly opening and closing channels, and if there's not money to be made, they won't last. If they somehow increase the LN fees to offset these defections, then say goodbye to your cheap LN network fees, defeating the whole purpose of LN in the first place. See how that works?
9) Centralization
Just a few of the LN nodes handle a huge chunk of the LN transactions presenting an easy target for destabilizing the network, rendering it vulnerable to large-scale economic outages. Will this become more decentralized over time to benefit the health of the network? Did the massive Chinese Bitcoin pools break up for the health of the network?
10) Easily Censored/Deprioritized
The LN node operator you have a channel with can quite easily decide who's to get their liquidity. It may be that some of the more popular and higher-liquidity nodes even charge a premium to guarantee larger payments and priority access, while the rest of us shmucks wait in the poor line.
11) LN Nodes are prime targets for hacking
LN Nodes are unable to exercise cold-wallet storage for their liquidity in order to be online all the time as required, and thus they are very-visible high-value hacking targets. This considerably reduces the motivation to participate as a LN node, and particularly discourages large liquidity pooling, reducing the overall size of payments that they can facilitate.
12) LN Scaling is hampered by complexity and lack of incentives
Only by a radical push of LN users paying high fees, can LN ever attract enough capital into new LN nodes to make it worthwhile for LN nodes. But at this point you've lost the critical motivation to even create the LN in the first place: cheap fees. It's a vicious cycle. Might as well just stick with Bitcoin if the fees are getting there anyways. At least with Bitcoin you can send as much as you want without chance of being rejected because of underfunded nodes.
13) Necessary timelock expiration to channels
Timelock expirations are needed to avoid perpetually frozen funds that may result when a node you have a channel set up with, disappears off the face of the Earth. This expiration imposes a LN channel closure which incurs fees. You better use that channel at least a few times to make it worth it, you can't just leave your funds lying around in a LN channel, it's not free like a wallet.
14) Works with any coin
My absolute favorite. So many people believe that LN is actually a Bitcoin plug-in, something that only Bitcoin can benefit from, but the reality is, most coins are compatible with the LN. To elucidate just how incredibly wrong they are, I'm going to demonstrate how LN can help me move my smelly socks.
My socks come in multiple flavors, such as fresh from the laundry, something you'd wrap your newborn in, but then there's my dayolds that have been fermenting in my tight breathless fine Italian leather shoes, oozing with toe jam stench so foul it would gag the grim reaper to...death. I'd rather eat roadkill than take a whiff of these puppies. Don't even ask me about the 2-dayolds.
Now normally, my smelly socks wouldn't be a very good currency. It can store value, like a billroll and 4 ounces of pot (unrelated). I can ship them overnight pretty much anywhere in the world, but at ridiculous costs. I can only wear a pair at a time, etc. Really not the best for moving value are they? However! I can, right now, create an IOU coin, call it SMELLYSOCKS, and issue it from the XRP Ledger, promising to redeem any of these tokens for an effervescent pair of my used socks. Start a few LN Nodes that specialize in provisioning SMELLYSOCKS payments, and voila, I'm open for business. Now anyone that wants to pay someone in SMELLYSOCKS could open a channel with me, and I'd be able to forward SMELLYSOCKS to the recipient.
Does this mean all of a sudden that my SMELLYSOCKS is a high performance coin? Of course not, LN, just surfaces 'value' from a coin. This means that Bitcoin being saved by LN makes as much sense as my smelly socks being saved by LN.
The problem is, Bitcoin's market value is 100% speculative, and vulnerable to seismic shifts in sentiment, and nothing about LN 'protects' its value, nor gives it value unique from any value it can give any other coin, like it did for my SMELLYSOCKS. In other words, LN isn't the Bitcoin panacea it's purported to be.
And the best for last...
15) MONEY IS BEING LOST
LN is riddled with bugs! Oh never mind, crisis averted because all the bugs have been fixed!. Augh, but wait people are still losing money!! Which side of "for realzies this time" do you want to be on?
How does it make sense that advocates of Bitcoin's virtues, are ready to sacrifice most of those virtues, just to compete on speed and cost? I'll tell you why, because they're hypocrites holding a bag of Bitcoins.
They praise the virtues of Bitcoin's pseudo-anonymity, and then give up all that privacy for LN speed, trusting the LN node won't sell their IP address and transaction history to the highest bidder
They'll accept very limited payment sizes, forcing them to make multiple small payments to complete a larger payment
They'll deal with the pain of having to coordinate being online at the same time as the payer/receiver
They'll expose themselves to transaction censorship at the whim of some snot-nosed LN node operator
They'll go through the trouble of prefunding a LN channel
They'll endlessly go on about how indestructible the bitcoin network is, and yet they'll promote an exposed centralized LN
They are in complete denial that LN works equally well for most coins, not just Bitcoin, so in that sense, it hasn't given Bitcoin any advantage at all
I'm seriously struggling to understand what the actual benefit here is, and the best I can see is that none of this shit matters to maxis. It's a clear acknowledgement that on-chain Bitcoin is slow as fuck, and costs too damn much, so the rest of Bitcoin's virtues be damned, fix it at all costs!! (including integrity).
What Bitcoin maxis don't have the capacity to understand, is that Bitcoin evolution is taking the form of "other coins that are better". We didn't stick a Formula One racing car engine in a horse-carriage, no, they developed a racing car, and the carriage went away. Everyone calls that evolution, why can't Bitcoiners see the parallel?
Now I'm not going to say that LN-advocates won't come up with even MORE complicated solutions to these second layer challenges (like eltoo, or splices, or channel factories...simple!), maybe adding third, fourth and fifth layers! Why not? Fine, maybe someday they will, BUT, there's a powerful force called STUPID, and the more complex you make something, the more STUPID will quash its adoption.
Here's the universal law of technology: Simpler = greater adoption
This is the reason we don't all build our own nuclear reactors at home, when we can just use power from the city's nuclear power plant and not have to deal with the complexity of nuclear physics. In other words, if all the complexity of scaling, speed, fees, and security can be hidden away in a coin's first-layer, then there's no need for the complexity of a second/third/fourth-layer at all, is there... Particularly if those other layers introduce their own problems and also takes away some of the virtues of the first-layer. That's a steep compromise just to subjectively improve a couple parameters.
Let me make a prediction. There will be a coin that surfaces that exhibits unlimited scaling, near-instant settlement, low fees, low energy burn, and all the scripting toolset necessary to make it Turing-complete. If this coin finds its way into considerable liquidity, it will absolutely dominate. This coin does not exist...yet... mostly because the toolset to manifest such a beast has yet to be created. Thus, if we were to rank coins by their approximation to this ideal, sorted by the most important attributes, it's beyond clear that XRP is the front-runner today. It's what LN aspires to achieve, but fails to accomplish because of its complexity and compromises.
LN is a Rube-Goldberg band-aid to a decrepit deprecated deceptive piece of technology. It only exists because there's so much wealth trapped in Bitcoin that there really is demand for it, today. The fight for the hearts and minds of newer Ponzi victims will eventually be lost however, and Bitcoin, LN, and all its other side-chain enhancements will eventually be shuttered, like the circus tent in an old abandoned amusement park rotting in a dark and stormy night, nothing left but the horror-filled childhood memories of bumper-car debates, roller-coaster valuations, smoke-and-mirror fake news, and carloads of endless Bitcoin maxi-clowns
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