Why will Lightning Network fail?

Avatar for Telesfor
3 years ago (Last updated: 2 years ago)

I used to think, like many, that Lightning Network would solve the scalability problems of Bitcoin.  Then I looked into it a bit more and came to the conclusion that LN will fail. In my article "Why I don't use BTC" I promised to write why. 

The answer is quite simple, Lightning Network is too complicated for the average user.  That's why it is unsuitable for mass adoption.

Some average users sometimes have problems using the normal very user-friendly smartphone wallets like Bitcoin.com or Trust Wallet.  Such users would be completely overwhelmed with LN Wallet. To make this easier to understand I will first explain how a normal Bitcoin transaction works.

How do you make a Bitcoin (and Bitcoin Cash) Transaction?

First you have to install a wallet.In your wallet, you enter the recipient address, the Bitcoin (or Bitcoin Cash) amount and press send. Done.

An example Bitcoin address:

bitcoin:bc1qm9hxngjd6hj44yn73p26f5k854u98krsm0fn5n

(Legacy: 3KwNxt5tX2U6riFjGNBa3ZXshzYyAUeGJ7)

An example Bitcoin Cash address:

bitcoincash:qzpg8k2j84pwdtuf7ll4kuszw6d5g3p9xcgk704qzg

(Legacy: 1Cu6nxjUgACKweizhfRAdrAqJH4ugSW9JP)

How does it work? The Bitcoin (and Bitcoin Cash) blockchain can be found on many computers on the Internet.  These computers are interconnected and contain all transactions (and thus also all unspent coins belonging to a bitcoin address that can still be issued). The normal Bitcoin (and also Bitcoin Cash) transaction works as follows: 

If you enter the recipient's address in your Wallet, your Wallet encrypts the transaction with the private key of your address, which is only in your Wallet, and the public key of the recipient and sends it to a Bitcoin node on the Internet.  Done.  When the recipient's wallet connects to a node, it can be encrypted with the recipient's private key and your public key.  Read the transaction and send the received coins back to the block chain in a new transaction and thus issue the coins. So the blockchain is nothing more than a record of transactions. It's easy.

How do you make a Lightning Network Transaction?

To make a LN-transaction you first have to install a bitcoin full node and install additional software from Blockstream on this full node.  This is how you created an LN-node. Then you have to specify an amount you want to use in the Lightning Network, an address from another LN node, you want to connect and make a normal Bitcoin transaction (for this you have to pay the bitcoin fee, which can cost $2 or more). Than you have to wait for a confirmation.  This opens a channel from your LN-node to the selected full node in LN. Now you are prepared and can make an LN-transaction by giving an amount and an LN-address of the recipient. Doesn't sound so easy, does it?

How does it work? LN supporters for PR reason say that in the Lightning Network Bitcoins are moved, but it is not so. When an LN channel is opened, the Bitcoins are converted into a kind of a token (I call them LN-tokens, something like Wrapped Bitcoin WBTC). If you make a 1 BTC transaction and open a channel, you get 1 LN-Token in value of 1 BTC in return. These LN-tokens have no Bitcoin address, but another address.

An example LN-address:

0358327cb80ab2a8db36a5924c62966c7b4a753045600df594aa3863ecb618cc5d@37.221.198.57:9735

These LN tokens have two advantages - you can send them almost for free very fast in Lightning Network, but many disadvantages:

  • Since they are not Bitcoins, you cannot send them to Bitcoin addresses.  You can only send them to LN-addresses which almost nobody use  (there are fewer LN-adresses than Bitcoin Cash addresses of read.cash users, although LN is much older than read.cash)

  • To send a LN-Token, both your node and the node to which you have opened the channel must be online.

  • If you want to receive an LN-Token your node and the node to which you have opened the channel must be online. 

  • If you received an LN-Token you can't convert it into fiat or other cryptocurrencies, because only one exchange supports it. You have to convert it back to Bitcoin (and to pay the Bitcoin fees again)

  • If you want to send LN-Token in value of 200$ or more, it might not work (because the most of LN-nodes have less capacity).

These LN tokens are moved between the LN-nodes and are not stored in the blockchain. If you send an LN token from one LN-address to another LN-address, you can either open a direct channel to the node (but this costs Bitcoin fees, because it always requires a Bitcoin transaction), or you send the token over the already open channel in the hope that a route is found (which often fails with higher amounts). Each intermediate node that moves the LN tokens takes a small fee. Nobody guarantees that the fee will not increase at some point if, contrary to expectations, a large number of users are to use LN.

The only way to use LN comfortably is with custodial wallets. However, the money stored in such wallets does not belong to you, but to the provider. It is as if you had entrusted your cryptos to a bank. Enlightened crypto users will never use this. Bitcoin was developed to become independent of banks and not to move from one dependency to another in order to do so.

There will certainly be very strong supporters of LN who will use LN tokens anyway, but with these disadvantages I am sure that most users will prefer other coins (such as Bitcoin Cash).  They work in the blockchain, are very easy to use and are supported by many merchants and exchanges.



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Comments

I really dunno anything about this but thanks for sharing. I'll look into it when I'm free

$ 0.01
3 years ago

Somewhat disagree. While any tech has many problems (btc also has many) there are custodial wallets that support LN simplyfing the user experience (which is your main contra LN adoption) and about no exchange supporting it is not true. You can easily convert btcLn using FixedFloat to another 19 cryptos with much lowest fees than BTC! And that's just the beginning of it.

No technology gain mass adoption right away. It can be replaced by something better in the future but for now it have save us a lot of pickles.

$ 0.01
3 years ago

there are custodial wallets that support LN simplyfing the user experience

Yes, those wallets exist. But the money in these wallets doesn't belong to you, but to the person who runs the wallet. Then you can take the money right to the bank. Most people won't trust these wallets.

and about no exchange supporting it is not true. You can easily convert btcLn using FixedFloat to another 19 cryptos with much lowest fees than BTC!

OK I didn't know this Exchange. So I will correct that there is one.

No technology gain mass adoption right away.

The white paper for Lightning Network was published in February 2015. The technology is no longer new.

There are other, technical reasons that speak against LN. I did not want to list them here because it would be too much and most people would not understand. Maybe I will write another article about it.

$ 0.00
3 years ago

Lightning Network has been hyped by the majority of the BTC-BCH holders. It solves the speed and scalibilty issues however it will bring new problems with it. In my opinion, you cannot force Gold to be currency used in our daily lives and the same thing is valid for BTC ETH or other things which cost a lot to move from one destination to the other. Let the be store of value; there are hundreds of digital currencies for daily use purpose...

$ 0.01
3 years ago

Lightning Network has been hyped by the majority of the BTC-BCH holders.

LN has been hyped by BCH holders???

$ 0.00
3 years ago

Nope just BTC hodlers. I wrote something different then deleted the part. BCH is not in need of it at the moment as for me

$ 0.00
3 years ago

Thank you for the donation, I really appreciate.

$ 0.00
3 years ago

I completely agree with you, the Lightning Network is a lost cause. A huge threshold for mass adoption of crypto in general is that it is too complicated for most people - that's why those custodian wallets are so popular despite the risk, they are simple to use and understand. To add something even more complicated to that, is delusional. The average person cannot handle it.

$ 0.01
3 years ago

Saying that the lightning network is a solution is like saying that any other blockchain with better scalability is a solution, disregarding decentralization and security. For some reason people assume that Bitcoin's qualities are passed down to the lightning network. Not true.

I'm just waiting for the day that the bitcoin community will finally understand all they have to do is raise the blocksize. As the cost of hardware goes down over time, it won't impact decentralization in a negative way.

$ 0.01
3 years ago

Okay! Truely the transection process of lightening platform is not like the normal ones! Transection of bitcoin cash is more easy and it also doesnot take more fee! So what is the use of lightning network! I dont think people will use it massively..

$ 0.01
3 years ago

I am not really aware what lightning network is but after reading this I somehow do have an idea now. Thanks for the write up.

$ 0.01
3 years ago

Actually my first time of hearing about lighting network. Nice article,there are many things to learn about the CRYPTOCURRENCY world I guess. Another great awareness

$ 0.01
3 years ago

Nice article

$ 0.01
3 years ago

Thanks for making this article

$ 0.01
3 years ago

To be honest, as soon as you started about making a wallet I already lost track. I do not have a bitcoin wallet and don't think I will ever make or activate it. It's way too difficult for me. I think that is the main problem for most. An easy to use the wallet, how to transfer, how to be able to trade if you can not buy anything for cryptocurrencies. All those steps, registrations, keys, etc.

It's amazing how many people have an account here or elsewhere and are not able to do the transactions themselves. Perhaps Facebook will make it easier to introduce and after that mass adoption will be easier.

👍💕

$ 0.01
3 years ago

for the writer it is very easy, but for the common people, it is not so easy, since they carry out other tasks in their daily life, to be able to subsist, and that is the advantage that the LN veteran brings to the common of mortals.

$ 0.01
3 years ago

I'm ignorant of this, thank you because you discussed it. This is the first time I heard about the lightning network. I learn from it.😇😇

$ 0.01
3 years ago

Oh wow, this is what I am looking for. Thank you @telesfor ill bookmarked this and try to understand it one by one. Being a beginner is like a first grader. I have to accumulate loads of information yo cope up. Or even just understand.

$ 0.01
3 years ago

@telesfor thank you for the donation, I really appreciate.

$ 0.00
3 years ago

Lightning network: an overcomplicated non-working malfix to a problem which would have only required to rewrite a few numbers in the code.

$ 0.01
3 years ago

Wow. This is really an informative article. Thank you for sharing this article. It’s help me to knowing many thinks..

$ 0.01
3 years ago

It is very helpful Article sir. Thanks you sir for sharing your article...

$ 0.01
3 years ago

Fantastic work

$ 0.00
3 years ago

It is very helpful article. Thnx for share.. Thank u

$ 0.00
3 years ago

Thank you sir your post is very important I was very pleased to see it Very interesting oo

$ 0.00
3 years ago

Thanks for sharing an informative article.. It help us to know many things😇😇

$ 0.00
3 years ago

Very fantastic article to meet

$ 0.00
3 years ago

Yeah, agree. The lightning network has more disadvantages than advantages.

$ 0.01
3 years ago

Another awareness again thankyou telesfor

$ 0.01
3 years ago

I agree with you. I had used the Muun wallet for sometime to make transactions over LN and a couple of other solutions and it was just painful. I am pretty tech savvy so I was able to resolve issues but that average user, maybe not!

$ 0.01
3 years ago

I guess the difference between address look something like the differences of IPv4 address and IPv6 addresses.

$ 0.01
3 years ago

Very nice sharing to us your knowledge about how crypto most especially BCH going on. I have a little idea about this but in every article you published I keep on learning abd gaining more knowledge to crypto world.♥️👍👍👍

$ 0.01
3 years ago

Lighting network won't solve the problems of BTC transactions, somehow people until now doesn't understand that and barely will adhere it, that is something complicated for a normal user that only want to use a wallet to make transactions without worries, a normal user just want to send and receive assets, and like you said an average user still get confused with the normal wallets such Blockchain wallet or Trust and when you mention Lighting network for those ones is like speaking some different thing than BTC, that is domed to fail!

$ 0.01
3 years ago

I don't know about the lightning Network, I wish I'm familiar too about Node, pi, not familiar to me 😢

$ 0.01
3 years ago

Cool name Lightning network and at the same time a name that definitely difficult to use by an average user like me😁

$ 0.01
3 years ago

I am completely ignorance about this topic, first time am hearing about lightning network. And from your postulation I won't think of downloading such a wallet with such complications

$ 0.01
3 years ago

Since i still have a lot to learn of the crypto world, i would prefer the simple ways of transactions. Thank you for this additional information .

$ 0.01
3 years ago