Crypto News

Are Bitcoin Developers Losing Faith in Lightning?

Those dreaded Lightning Network… Looks like people are starting to lose faith in Bitcoin, despite its long history of being hailed as the off-chain solution that Satoshi Nakamoto’s “peer-to-peer digital cash” needed to become a real payments network.

A number of developers have left the Lightning project, the number of complaints and defects that need fixing is increasing, and the network’s liquidity has been steadily decreasing, according to an article in the industry newspaper Protos.

All things considered, it appears that criticizing Bitcoin’s primary scaling solution is, if nothing else, gaining more and more acceptance.

This is a snippet from The Node newsletter, which compiles the day’s most important cryptocurrency news from CoinDesk and other sources. To receive the complete newsletter, you can sign up for it here. In April of 2024, Bitcoin will undergo its fourth “halving,” and CoinDesk’s “Future of Bitcoin” package included its publication at the same time.

To some extent, this is accurate. In 2019, Tadge Dryja, who co-created the network, was already open to discussing the “limitations” of the scaling solution. However, he stopped actively contributing to the project after a few disagreements with Lightning Labs, the leading developers of Lightning, about how to scale Bitcoin. This was just a few months after Lightning launched and nearly four years after it was initially proposed.

Also, it seems like Joseph Poon, who was also a co-author of the Lightning white paper, is now more curious on blockchain scaling solutions on other chains, such as Plasma on Ethereum. A novel decentralized exchange is currently his focus.

Lightning has been plagued with multiple flaws that have affected various implementations of it throughout the years. For example, in 2022, incorrect code in Lightning Labs’ preferred implementation, LND, blocked users from transferring cash to the mainnet for a few hours. (Although, to be fair, security holes are usually fixed before they are even used.)

Lightning has a lot of privacy problems, and other bitcoiners are worried that it’s too expensive to utilize. Specifically, they gripe about Lightning’s “inbound capacity” architecture, which caps the amount of Bitcoin that consumers may get and forces them to pay to receive more cash (or has their payments subsidized by entrepreneurs).

John Carvalho, a lifelong bitcoiner and former Lightning advocate who attempted to build software solutions on top of the protocol, seems to have started the most recent round of Bitcoin Lightning conversation. After Carvalho criticized the protocol’s “complexity and fragility” in a recent interview with Vlad Costea, it gained attention.

“After going through that, I can now see that the design is somewhat ridiculous,” Carvalho remarked. Together, we can find a way to make it happen. No matter how hard we try, the stories that accompanied [Lightning] in its early years were greatly overblown.

Although Bitcoin’s Lightning Network has been heralded as a possible substitute for Visa’s payment rails and the catalyst for “hyperbitcoinization,” public opinion on the matter appears to be shifting.

A lengthy list of “black pills” was published by Bitcoin developer Paul Sztorc in response to Carvalho’s interview. These included concerns about the scalability of the Lightning Network, the “channel risk” associated with your interactions with other users, the payment failure rate, and the fact that the amount of bitcoin posted to the network is a “microscopic 00.025%” of all bitcoins in circulation.

In addition, Protos pointed out that the overall quantity of Bitcoin on Lightning has been steadily decreasing, falling from approximately 4,750 BTC today to less than 5,500 BTC in December 2023. Though it’s important to mention that the financial value provided to Lightning has increased to around $320 million today compared to $158 million last year, which would indicate that individuals are leaving Lightning.

Looking at the numbers alone is confusing: both the number of Lightning nodes and the number of connections between them are falling from a high in 2022, while the total number of transactions has supposedly been going up.

The more one reads the personal and anecdotal stories compiled by Sztorc, who has been promoting a different method of Bitcoin scaling called “drivechains,” the worse the image becomes. Respected Bitcoin Core engineer BlueMatt has repeatedly branded Lightning “a joke” in the last year. After writing a very negative blog post, Lightning security researcher Antonie Riard departed from the project. The popular social network Nostr’s inventor, FiatJaf, also discussed his declining self-assurance.

While CoinDesk doesn’t claim to have all the answers, it seems that Lightning’s development is, at most, somewhat stagnant. People have been claiming for years that Lightning is overhyped and that its fans were setting excessive expectations, so to suggest public perception has shifted on the subject would probably be an exaggeration.

Actually, Tadge Dryja and Joseph Poon, who co-created Lightning, were upfront about the fact that it wouldn’t address all of Bitcoin’s scaling issues. The fact that Lightning is perpetually “18 months away” is a meme for a reason.

The criticism that Lightning was overly hyped during the last bull market and promised too much too quickly is hard to dispute, but it is vital to place these discussions in perspective. After years of beta testing, the network finally launched in 2019, but bitcoiners were quick to call it a “experimental” option.

A popular hashtag cautioned users to only send amounts they could afford to lose when using Lightning, coinciding with the first global test of the network (the “Lightning torch” went around the world to collect funds after Craig “Faketoshi” Wright sued the anonymous bitcoin supporter Hodlonaut).

The Lightning network has been and continues to be the subject of valid criticism, which, in order to spur improvements, ought to be spoken. Opening and closing channels is a costly and laborious process. Many problems with scalability and security exist. Incorporating custodial solutions into Lightning’s usability for everyday usage brings back the issues with third parties that Bitcoin was originally designed to address.

If there’s a silver lining, it’s that Bitcoin’s most ardent fans are also its most vocal detractors.

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