so if the transaction fee is $0.50, you get to transact at 1% cost
if you paid $0.50 for each coffee it would be 10%
Can you really imagine how this would work IRL?
"-Here you go sir, that'll be $32 please."
"-OK, I'm paying it Bitcoins... Oh, you don't have an open channel, I'm going to create one... Mmh, but how much to I put in? Let's say $100, I'll probably buy here again next week. But will that be enough? What if my total is just above that next time? I'll have to pay the fee twice. I guess I'll just make sure not to go over $100."
"-We also accept cash, Visa and MasterCard sir."
Again, maybe it can work, it just feels so "theoretical" so far, I haven't seen anybody paint a convincing picture of a what a "Bitcoin as Visa replacement" world would look like concretely.
It's much better than a Starbucks app.
And while this is an important feature of lighting, it's not actually a "feature" when compared to Visa or MasterCard and the centralized banking system from the point of view of the user. Ideally this should all be hidden away from the average customer.
People won't want to worry about graph theory when paying for a sandwich at a gas station. Existing payment solutions still wins hands down 99% of the time when it comes to convenience even if we imagine a "perfect" lightning network. I really have a hard time imagining what would drive a mainstream adoption of bitcoin over the current status-quo.
Lightning will work the same way. Nobody needs to worry about graph theory, they can just generally assume that the graph is fully connected, and that their software will be able to find a path from A to B.
What will be bitcoin's "ISPs"? Who makes sure the graph remains connected and usable? Who invests in the "infrastructure", making sure channels remain well balanced? Some say that Lightning will be self-balancing through a clever set of incentives, but that's again extremely experimental and untested.
Also note the big "net neutrality" thing going on in the US right now. What will prevent big players from teaming up and interconnecting with each other to facilitate transactions while leaving out the rest?
I don't have the answers to any of these questions, maybe it's just FUD. I'm just surprised that bitcoin is a couple of weeks from making such a huge jump into the unknown. It's extremely interesting to be sure, but I feel like some people are going to get severely hurt if this whole thing comes crashing down.
I don't see a reason that exchanges couldn't take on the role of ISP/bank in this situation. Essentially you have an account with 1500 BTC at an exchange, and you say that you want to put 500BTC into a lightning network. Then the bank centralizes itself in the lightning network graph by making connections with other large banks and some major companies.
Of course what we've just done is recreated the modern centralized payment processing scheme on top of the bitcoin network (ie. a mom and pop shop connects to square connects to BoA has my money which doesn't actually exist anywhere, and they make ledger changes and top up later).
You might even be able to make such a system work with no additional transaction fees. But I'm not sure of that.
God I wish this was still true. The internet is so fragmented now I have to have IPs in different nations for a unified experience.
It's called a credit/debit card.
Yes. This is basically the exact user experience of the Starbucks app, and it's a fine experience.
You pre-pay an amount, have a balance open, transactions reduce that balance, and you occasionally need to reload your balance with another credit card transaction.
Which is to say I don't think this is an intractable problem if there is good software with good user experiences to help out.
All that said, I'm not current on the block-size vs SegWit debate, so my analogy could be flawed.
Now take amazon, take that small shop on the street where you go twice a year because it's super expensive but it's also opened very late, take your car mechanic, take that guy on ebay you're buying a pair of socks from, take that restaurant in Berlin during your vacation where you'll probably never go back. Will you be willing to "pledge" 10 times the amount while buying there? And if not won't the fee be dissuasive? What's in it for me?
And won't that create negative side effects for competition? For instance if a new coffee shop opens next to Starbucks with your system I have an incentive to keep going to Starbucks since it already has an open channel (exactly what the Starbucks app is about, except I'm paying for it, not Starbucks), so effectively it makes it harder for newcomers to compete. Same thing for, say, amazon vs. some random ebay seller. The more popular a shop, the more likely it'll be to have an open channel pending. Isn't that going against the "completely decentralized currency" ethos? What good is it that the currency is decentralized if I can effectively only use it with a limited number of companies?
It would be pretty amusing to me to see the cyberpunk libertarian cryptocurrency turn into a glorified Costco membership.
All the practical "here's how lightning's going to work" papers I've read so far leave me very skeptical. Here's an example: http://diyhpl.us/wiki/transcripts/scalingbitcoin/hong-kong/o...
The Q-and-A at the end in particular is interesting:
>Q: On the last slide, one of the assumptions was 3 channels per person. Assuming payment channels wouldn't be useful for retail sales, because you don't want to buy a coffee just to open immediately. Is that correct?
>A: Joseph might expand on this. Let's say you buy a coffee. You're probably buying a coffee only once, right? Well, maybe the coffee is $5, and you put $50 into the channel and leave it open. Then someone else comes to the coffee shop and she does the same thing. But she has a channel with the grocery store. There's me, coffee shop, Alice, grocery store, they all have channels. When I go to the grocery store next time, I don't have to open a channel. Payments are routed.
>Q: It sounded like everybody would have to open new channels.
>A: I am guessing the mean is going to be 3, but it will probably be an exponential distribution. Most people will probably have 1 channel, and then some might have 100s of channels open.
I don't know about you but while on paper that might work I still see a lot of hand waving, guesswork and rather unsubstantiated assumptions. Why would I decide to "lock" $50 worth of Bitcoins when I buy a $5 coffee? What's the incentive for me to do this? Where does this estimate of 3 come from exactly, I see it repeated everywhere but I can't find the maths behind it?
Here's an interesting attempt at simulating a real-scale ligtning network (why aren't there more of these? Aren't we talking about a $40bn market cap currency here?): https://hackernoon.com/simulating-a-decentralized-lightning-...
The simulation is rather unrealistic and I'm not sure how to interpret its conclusions. It seems to kinda work but there are issues:
>133,401 micropayments were attempted and 3461 (2.6%) of these failed. For successful payments the median number of hops was 19 and the median total fees were 2 bits (0.000002 btc) or 32% of the value transferred.
Now it could be caused by a bad simulation rather than a real issue with Lightning network, but frankly I can't tell at this point.
I don't have a horse in this race but as seen from the outside it all looks a bit rushed and amateurish. I don't know the whole story though, maybe I'm just poorly informed.