Bitcoin Forum

Many of us are familiar with this (https://1ml.com/) site, but if you aren't, you'd better make yourself now:

https://d.radikal.ru/d11/1901/e9/14bbaf377e22.png

At the moment there are over 540 bitcoins locked up in Lightning Network payment channels. You may think it is not really a big deal, but it is the change that counts in this case. And if that number continues to expand like before and still more so if such growth will be explosive in the future, this metric will certainly start to be taken into account, if not already, and thus affect Bitcoin's market price. It is not some bullshit measure like the blocksize which gives us absolutely no clue about what's going on right here right now. In fact, I very soon expect the Bitcoin Cash proselytes (whatever flavor) to be eating their hearts out in envy for the lack of such a number

Indeed, you can claim that the number of payment channels and bitcoins doesn't reflect their actual use and you may be right to a degree. But for market it is irrelevant even if it is totally true. These coins are not traded anyway, so they do affect the balance of supply and demand, and as I said, when this number explodes along with the amount of bitcoins used in Lightning Network as a value transfer vehicle, the effect will be felt strongly. In this regard, Lightning Network stats are objective and should not be discarded. Beyond that, there's also psychology at work as people will see with their own eyes that Bitcoin does make a difference as a means of payment and builds real value through that

So don't forget to visit that number to see where the market is going

it is not "locked up" in lightning network, LN is not a safe to lock anything :D
that is the capacity of it at the moment based on the money that people have put in their channels which is in 17 thousand range right now.

as for the effect on bitcoin price i think it won't have any significant effect for as long as it is not used by any major businesses. for example as long as exchanges have not yet set up their LN node. but as soon as that happens and we see some more real usages on a larger scale it can cause a big explosion in adoption and with it the price will rise fast and big.
there is also the problem that LN is not yet as safe as one might hope. it needs more work and it also needs more user friendly, easy to use applications so that regular people (like traders in case of exchanges) can easily and securely use it.

I think that the term used describes it correctly

Technically, you can refer to the bitcoins used in LN as locked up or frozen simply because you can't sell them and more generally you can't use them for anything, e.g. to move them from one wallet to another before closing the channel. So, in a sense, they are locked up (as in a safe). Regarding your other point, I don't quite agree with it as you apparently underestimate the psychological effect of that number rising and how fast it rises. In other words, the market won't wait until "it is used by a major business". It will anticipate such use in advance which will reveal itself in price rise. This is how such things work in practice


Right, but it is not the only effect and likely not the strongest one either. You may want to read the OP in its entirety as other posters are recommending

Pretty much, due to the coins being temporarily locked up, it's pretty much almost like a decrease in total supply.

Decent read by the way. Especially that we're in a bear market, I tend to look at the statistics that actually matter for the long term instead; like the percentage increases of lightning nodes and locked up bitcoin. It's been nothing but up in the past months.

they are locked up on the bitcoin network. not spendable on the bitcoin network

then on the separate network called lightning. people then play with unconfirmed/ unaudited 12 decimal transactions pegged to the locked value.

on the separate network known as lightning. the future will be that exchanges will be the co-signer of the main vaults. that way without using the bitcoin network. people can use the separate network to arbitrage 'route' the pegged funds between different different exchanges.
(as long as the 'routes' are online/have funds available/agree on it)

Thanks for your feedback, greatly appreciated


If you ask me, it is likely the first metric ever that distinguishes Bitcoin from other currencies and which can be considered actually reflecting real usage (not without reservations, though). Of course, there is also an average number of transactions per day (which has been rising over the last months too, just in case), but it is not as promising in this regard because in the past we had seen massive transaction jams where most transactions were not genuine and created deliberately to congest the network and render it useless

In other words, I don't expect anyone to freeze their bitcoins and open up LN channels just for kicks

LN is not a bitcoin only network feature
LN is a separate network that multiple coins can and do use.
the proof that its a different network is to simply ask you what does N stand for in LN

LN will still function even if no bitcoiner uses it because litecoin, vertcoin and other coins will use it.

sorry to burst your overpromised over advertised fluffy cloud. but LN was only hyping up the "bitcoin" buzzword
to hype up some investment from VC's

just like Circle(a fiat company)
just like Coinbase(a fiat company)
where they too play around with multiple coins/currencies. but kept on shouting out "bitcoin" to get funding

again sorry to tell you this but lightning will not give bitcoin any unique functionality

research it. hint: chainhash
here ill even show you a few lines of code that LN is not a bitcoin feature but a separate network for different coins
https://github.com/lightningnetwork/lnd/blob/master/chainregistry.go#L580

^note LITECOIN is coded into it by default, just for starters

Buddy, I don't quite see your point

But you definitely miss mine. I'm not questioning Lightning Network's capacity to be used for coins other than Bitcoin. Moreover, I'm well aware myself that LN was first activated in Litecoin (in April, 2017, to be exact). But the question is whether it can actually be used as a metric to gauge the success, or lack thereof, of these coins (in this case, Litecoin) like we can do now with Bitcoin. That's what I wanted to emphasize in this topic, that for the first time ever we have something really useful and pretty straightforward for that purpose with the least amount of noise. And that's where Bitcoin differs from other coins this time

https://i.imgur.com/y70bHFe.jpg

Basically, we have a finger (well, two fingers) on its pulse as a value transfer vehicle

Lightning Network stats are objective but it's difficult to grasp its full effect on price dynamics. It adds utility, but it also encourages people to run Lightning nodes so they can collect routing fees. If coins are being locked in channels -- or in some cases, bought specifically to lock in channels -- that lowers available Bitcoin supply on the market. That should definitely benefit the price.

Lightning might not be solely related to Bitcoin, but once it does what it should be doing in the most convenient possible manner, the little utility that Litecoin has, which is relatively fast and cheap on-chain transactions, will become less of a thing as time goes by. It's not for nothing that Charlie Lee dumped the majority of his holdings. If you had any sort of grounded faith in your own project, you wouldn't be doing that.

People use that what they consider to be the most reliable and adopted networks, and Litecoin isn't part of that. I'm not saying it will vanish, but it is standing on its last legs. Bitcoin and Ethereum are the only ones with a very strong network effect, and the trash coins below them don't stand a single chance.

Yes, at first I wanted to delve into that matter a little deeper but then I thought it might be too much for one post. There are of course second level effects of Lightning Network (pardon the pun). Just to name a few, a shorter supply will most certainly add to volatility, not so much to price, at least not in the first phase of the Lightning Network adoption. It will take some time before the transactional utility kicks in for real and makes the price grow organically (as opposed to purely speculative growth). On the other hand, the spike in volatility itself will adversely affect this transactional utility that Lightning Network provides

So in real life the effects will be pretty much complicated to be reliably estimated in advance

I've never seen a compelling argument from you as to why this is a problem. Interoperable protocols can give us unprecedented functionality. Why does it have to be unique to Bitcoin? In fact, nothing is going to be unique to Bitcoin since it's open source and permissionless. Anyone can port its features into other altcoins and protocols.

LN has never been a bitcoin feature its always been a separate network.. infact bitcoin needed to change to become compatible to LN... LN did not change to be compatible to bitcoin

so stop advertising it as a bitcoin feature as if its something that will boost bitcoin and saying its somthing that bitcoin has and its linked as a bitcoin feature and a layer of bitcoin.. in a way that foolishly implies that it will make bitcoin supreme compared to other coins

what you then need to do stop saying bitcoins network needs to raise fees and shouldnt scale the bitcoin network with your empty fear arguments that scaling bitcoins network would harm bitcoin node users
purely to attempt to get people to depopulate bitcoins network and to then not want to return to the bitcoin network
i say this as your the one that seems to want to reduce bitcoins desire/demand/utility.
(much like 18th century banks told people to vault up gold, use co-signed accounts/unaudited payments. and then only exit with silver)
its the old thunderdome: 2 coins enter one may leave

so if you really want to promote LN FACTUALLY and fairly
1. inform people that its a multicoin separate network useful for a NICHE of users that spend often
             emphasis on niche..
             not something for everyone
             not essential thing that solves everything including scaling
2. inform people of the risks (not just the fluffy unicorns)
3. also try to persuade devs of bitcoin to adopt a fee priority mechanism for bitcoin to punish spammers(regular spenders) more than just average people. thus incentivising regular spenders into the niche use case of LN. while not harming everyone else who wants to fairly remain on the bitcoin network

atleast be critical (meaning pros and cons).. rather than the fake over promises/ under commitment fluffy cloud stuff you have been pushing

You seem to discard or forget the psychology thing. It is not a secret that most of Bitcoin value presently is speculative in nature, i.e. it is not determined by Bitcoin's real use, for example, as a vehicle for moving wealth around (otherwise known as transactional utility). It means that just a noticeable expansion of Lightning Network use in Bitcoin will suffice to instigate a speculative interest for it all over again. That's what I'm writing about in the OP

As an aside, the tenets of the subjective theory of value are fully applicable here. And this theory says that value of an asset (or anything else, for that matter) is determined by what people think of its qualities, even if they are imaginary only (though actually having such qualities helps a lot). In simple terms, if people start to believe earnestly in the success of Lightning Network, the Bitcoin price will surge despite the technology substantially lagging behind

That's one of the reasons why Bitcoin has risen to such heights even if its real world use remained minuscule

bitcoins main thing that raises the price SUSTAINABLY is the market:mining dynamic

its why POS is so crappy. because even with beleived "better features".. the cost of its creation does not play out a good "whats the cheapest way to get the coin.

if it costs $4100 to mine 1 bitcoin then people would b willing to pay many thousands just to buy it...
.. as long as BITCOIN has utility and desire

if a PoS costs $0 to make then people wont pay thousands for it.

yes there is speculation on top which is where bitcoin moves way up from the underlying value.
yes there is speculation on top which is where PoS coin moves way up from $0 value.

but the speculative layer ontop value is subjective and not sustainable.
so LN is more speculative than an actual thing that will provide sustained underlying value

..
once you understand that. you can then run scenarios. and if bitcoin becomes to costly to transact as a bitcoin network. people will exit LN using other altcoins. thus making bitcoins desire/utility far less.
if desire for bitcoins net work desire declines people will end up mining other coins. again less desire for bitcoin when the mining:market dynamics play out.

so those fluffy clouders that over sell LN not realising that it can actually make things like litecoin become more popular, end up shooting themselves in the foot overselling LN and not concentrating on BITCOIN NETWORK things

The labor cost party is definitely beyond redemption

How low should Bitcoin's price go till you understand that the cost of production has no effect on price whatsoever, and still more so with Bitcoin, given its adjustable difficulty rates? When Bitcoin first crashed to 6k, many folks around here started to preach that it wouldn't go below 5.8k because such was the cost of production back in the day. And now it is being traded below 4k with Bitmain laying off thousands of its employees. Some dude here even promised to eat a live frog if Bitcoin would stay below 5k till the end of the past year. And what d'ya think, it had stayed below 4k most of December, not even speaking of never coming close to 5k during the year end. The fate of the frog remains unknown, though, dead or alive, in case you are curious

Who cares? Are protocols never supposed to be upgraded to allow new features? Are we supposed to live with the malleability bug forever because you want us to?

Lightning adds utility to the Bitcoin network. It's a net positive. You can continue using only Bitcoin if you want. What's the harm in LN users using Bitcoin sometimes and LN other times?

LN is cool but at this stage of its development the only merchants willing to actually embrace it are ones catering towards nerds. It's nowhere near becoming user friendly so no real adoption will happen because of it - which in turn means that it shouldn't directly affect the price because of good adoption news.

HOWEVER

The more BTC we have locked in LN, the less there is on the market. The less float there is on a market, the easier it is for whales to manipulate the price.

Good news is that for most of them, the most profitable manipulation is by pumping the price. But downwards movements might also be more extreme.

In either case, it's worth observing closely

That's the point I was trying to get across many times myself

But it was falling mostly on deaf years, alas. It is like claiming that larger blocks will lead to an increase in adoption rates while even today's blocks are not filled to their limit, apart from periods when the network gets hit by a bout of massive spamming. Basically, people claiming that are putting the cart before the horse and confusing cause and effect. In other words, LN will be used whenever there is a need for it, not the other way round, i.e. no need will arise just because of LN being released into the mainnet


So far the number of coins locked up is mostly irrelevant to produce any substantial dent in the supply, but as I have already mentioned earlier, it is the expectations (aka hype) that may have their decisive say on the price

All else equal, it would remove coins from the market. That should amplify the effects of increased demand, which should push price upwards. It's the same as the altcoin markets: People buy BTC to buy altcoins, and bitcoin holders also send their BTC to altcoin exchanges instead of selling for fiat.

There's no reason this would make it easier for whales to push price downwards.

It is not quite so

As I explained just yesterday in this (https://bitcointalk.org/index.php?topic=5092723.msg49029675#msg49029675) topic, a thin market makes manipulation easier for any direction. As it happened with the market at the top, it is also possible with the market at the bottom (though I agree it is a bit counterintuitive). The thinner the market the easier it is to move it in any direction. So if supply decreases (for whatever reason, including the effects of Lightning Network) and this decrease is followed (or preceded) by the corresponding decrease in demand (for whatever reason as well) to keep the prices at the same level (if we accept your assumption of everything else being the same), the market becomes more susceptible to manipulation due to less available liquidity and shallow orderbooks

LN wont be used for people making 1 coffee purchase a day. its Niche will end up being people that want to balance swap with exchanges to arbitrage without waiting for confirmations.

people in the past would sell a btc for dollars on an exchange with highest btc-dollar rate.
then to arbitrage buy an alt with fast confirm. use that to exit one exchange go to another exchange with a cheap btc-dollar rate and then deposit alt to then sell for dollar to buy btc cheap

then hope to withdraw the btc to then return to the high btc-dollar to repeat.

.. stable coins sorted out the need to use an alt to shift dollar without wire transfer and LN will sort out shifting btf without confirm.

so those who love and dont mind locking their BTC up with custodians will use LN for that purpose.

LN wont be much of a vault for people that just buy coffee and groceries because the once a day, require to preplan a fortnight/couple month spending and the worry of route raiding, partners offline just are not convenient enough. people will just buy giftcards for their favourite merchants for convenience.

emphasis
LN's lockup would moreso be for the custodian factory of exchanges using the locked btc as a international 'reserve' system for inter-exchange swaps

If lightning network work on bitcoin and make transaction more faster and cheaper, i am believe it will give big effect to bitcoin price. Thats mean investor will more confident with bitcoin and the technology. If transaction growing faster, i think mass adoption become more faster

That's not all else equal. LN might facilitate lower supply, but there's no reason to assume there is a corresponding decrease in demand. You're calling it a "thinner market" but it's only the sell side that's thinner. In fact, LN might create additional demand -- it provides new utility and creates incentive to open LN channels (routing fees).

I expected you to say exactly that

The problem is you can't have everything else equal as you suggested. If you assume that the price remains the same, then the demand should necessarily go down if the supply gets diminished, which is market thinning and kinda expected in a bear market with prices falling and demand declining. Otherwise, with lower supply and same demand, prices will just start rising on their own according to the law of supply and demand, without any manipulation, and whales won't have to push them upwards

Then again, you yourself assume increased demand which is not quite "all else equal". So what do you actually mean by that, to avoid further misunderstanding and confusion?

Obviously, market conditions won't be exactly the same. The point is that we are isolating one variable -- decreased supply due to Lightning.


That makes no sense at all. If demand dropped equally every time supply dropped (or vice versa), then price would never change. We've established why market supply might decrease if Lightning became popular -- it incentivizes Bitcoin holders to lock up bitcoins. You haven't provided any reason why demand needs to drop. If Lightning lives up to its hype, there should actually be increased demand.


Exactly. :)

But a thinner sell side also inherently makes upwards manipulation easier.


https://en.wikipedia.org/wiki/Ceteris_paribus

I don't assume increased demand. I pointed out the possibility, though.

"That makes no sense at all"

Well, actually, it may make some sense but only if purely theoretical, for at least two things. First of all, it is something which is not worth discussing per se because it is kind of obvious that if supply decreases with demand being the same, the price should inevitably rise, at least as long as we accept the balance of supply and demand as an accounting identity which holds in all cases. And second, this is of no practical interest because this is not how things typically unfold in real life and especially these days when the prices have been on the decline for a year


In fact, I don't need to provide any specific reason. The price falling most of the time throughout 2018 is that reason which provides for itself. If you accept that fact, you should also accept the fact that demand has been falling too. Obviously, it is not just demand alone but there's no telling how much of the price drop should be attributed to a squeeze in demand and how much to an expansion in supply. Whether the hype associated with Lightning will be able to offset this squeeze and to what degree remains to be seen


A bear market means the demand side is thinning too. So it all depends. This is what ceteris paribus doesn't take into account and exactly what my idea of supply squeezes hinges on. LN will likely add fuel to this effect, to its supply and demand sides

Apparently it's worth discussing because you argue that lower market supply makes it easier to manipulate prices downwards. It seemed necessary to point out the basics of how supply and demand works.


It is of practical interest because we're talking about how decreased supply (due to BTC locked in channels) will affect price.


You do need a reason since you keep saying "the demand should necessarily go down if the supply gets diminished." That makes no sense whatsoever!

Demand has been falling since the 2017 high. So what? Demand has obviously been consistently rising since 2009 too. These points are both completely irrelevant to the question of Lightning's effect on price.

Why did you bother making this thread if you planned to ignore any discussion about the Lightning Network? I was trying to have a discussion about how Lightning might affect price -- not about how demand falls in a bear market.


The discussion was not about the effect of a bear market. The discussion was about the effect of the Lightning Network.

See the thread title.


You don't get it. "All else equal" is just a simple conditional to explain that we are isolating a single variable. The purpose is so we can discuss the effects of that single variable -- the effect of diminished supply due to Lightning channels -- without worrying about the plethora of other variables in play.

If you don't isolate variables, these discussions aren't worth having at all. You should just say, "There are many factors that affect price" and leave it at that, and not bother creating threads like this.

This will be my last post here. This obviously is not a constructive discussion.

I think that the lightning does not affect the price of Bitcoin in any way since this news did not have a very powerful effect on the market as a whole.

Welcome to the club, bro!

When the price was hitting new highs every other day a little over a year ago, some folks here said essentially the same as I tried to explain the reverse of what I'm trying to explain here. What happened next proved me right, though. You forget that price is going down now just like it was going up back then

Regardless, you add words but you don't add value to the discussion. This is what I call noise. If you disagree (which I understand), then don't hesitate to point out your thought, idea, or insight revealing something which we didn't already know. In other words, what is that which you brought to the table?

Personally, I'm not interested in stuff like "supply goes down, price goes up" as it doesn't tell anything new and it is too abstract to have any practical importance, apart from what we already know (but I repeat myself)

Well, people in this thread are correctly pointing out that by locking bitcoin in LN you're lowering the float, leading to slightly more powerful price movements when whales sell/buy.
But bitcoin, being the most mature crypto out there, will see less price movements based on news - good or bad. It's still significantly more volatile than stocks, but it's the most stable crypto out there, sans stablecoins.

It is a very simple concept really

A bit of supply locked away by LN is not dependent on price. It means that if the price changes, a change in supply caused by the coins locked in LN is not going to disappear as it is not caused by the price changes, even if some coins may in fact leave LN and get sold at a higher price. The lower supply will lead to a somewhat higher price, which everyone seems to universally admit

But as the price goes up, the demand for coins necessarily decreases (and still more so in a generally downtrend market). And that leaves us with higher volatility as both supply and demand decrease down the road, the former due to coins "lost" in payment channels while the latter due to an increase in price. The net effect is that the market becomes thinner on both ends or sides and thus more susceptible to manipulations and price fluctuations

I agree with that, and I think it really needs a lot of time before the Lightning Network is mass adopted by the crypto community because at this point of time just what you have said it is still not safe for usage and it should be used at anyone's own risk. The transaction speed of Lightning Network is really fast but the security is still not proven compared to Bitcoin's blockchain that is already proven throughout the years of its existence, but even this LN has some kind of awesome features I still prefer the original Bitcoin network. 8)

On the other hand, if there is enough hype caused by a LN explosive expansion, this alone can lead to a boost in demand and consequently price. But the drawback is that hype is not going to last for long as it is with any other hype out there, especially if it is not followed and supported by the real use of this technology. Compare this to a long-lasting and landscape-changing effect of Lightning Network itself taking off for real

That would be like an avalanche, and a never-ending one at that

Well it may be some sort of coincedence when btc and that network has come to market price increase. But, there could be also a chance that the bitcoin market price increase was due to the lighting network's hype since all of the crypto are alternative to bitcoin and all of the crypto were being influence by bitcoin market price movement and vice versa.

the thing about hype is that sometimes some types of hypes are based on false promises and lies like what the altcoins have been doing for their pumps. this type of hype is not going to last and will go away. and there will be a big dump.
but another hype is based on facts and there is some reality to it. if this type leads to a rise then it will last even though there may be a correction in case of a bubble because of that hype.

the LN hype is of second type. there may be some exaggeration and misunderstanding in there too but it is based on facts. the facts that it offers limitless scalability, near no fees, instant transactions,...

october 2013 hype triggered by new asics compared to GPU
which caused a change in the mining:market dynamics of cheapest way to get bitcoin.. but it over inflated and bubbled due to the FOMO speculation

november 2017 hype triggered by VC's being satisfied segwit was activated by deadline
which caused buy up by VC's... but it over inflated and bubbled due to the FOMO speculation

if all you care about is promoting something to death purely to cause a hype bubble. just realise one thing...
they only last a couple days-weeks-months before correction

so dont waste years promoting another network just for the hope of a 2 week-month price movement

Any coin not linked to a centralized exchange and not being used to influence/manipulate the price is a positive for me. We have recently seen how some exchanges have been implementing fractional reserve type practices to manipulate the Bitcoin market and the coins in the LN will not be a part of that.  ;)

The LN should only function as a second layer application targeted at micro payments and should never replace the on-chain transactions for larger amounts of BTC that needs to be transferred on a more secure network. 

We can only hope for that

Again, this is a cart and horse problem ultimately, a problem of cause and effect. After Segwit activation, there's little doubt that LN will be activated sooner or later in the mainnet. But does that mean it will be used to the full in a short while or even to any significant degree? Let's remember that it will be two years in April since LN had been activated in Litecoin, and so what? Its use is still in single digits, and I'm not sure if these digits are not after the decimal point

This is to say that activation alone won't suffice. The adoption should rise as well to make use of this endless scalability. But here's the catch. If the adoption is to rise, how much of it will be caused by LN? I don't think that much. In other words, if it is set to rise, it will rise even without LN. So what difference does LN actually make apart from letting people know that Bitcoin is ready for industrial-scale transaction processing?

It is not about the news at all

It is about the Lightning Network potential effect on Bitcoin when it actually starts to be used in earnest. Whether and when it is going to happen is another question but still worthy of discussion here. Personally, I have no doubts that it will have serious impact on prices just like the last halving had even though it took some time to actually kick in. Obviously, Lightning is not the same as halving but that's what it makes it more interesting to analyze

Lightning Network seems to be expanding slowly (though how much it is actually used for transfers still remains an open question). Here's the thing that my attention has been drawn to:

https://a.radikal.ru/a05/1903/08/30310cfdf5d0.png

Apart from a steady increase in the amount of bitcoins used in payment channels (542 at the time of starting this thread versus 752 now) along with the number of these channels rising (17604 back then versus 32020 now, which is almost a twofold increase), we can see that some entity calling itself BitMEXResearch is seemingly experimenting with the Lightning Network technology. So what do you guys think?

Does it look like exchanges started to test waters with LN for real?