FWIW I think this is a good honest discussion with a well thought out criticism.
I can see a world where LN becomes a centralized system. Eg I walk into a “bank” and they help me setup a private key then when I deposit FIAT they open up a channel on Ln with my bitcoin account and fund it.
Alternatively my bank could just issue me credit by funding my LN channel -this is basically what Visa does.
At that point I’m on LN/bitcoin but would have gone through a KYC check. I probably wouldn’t need to open many other channels because the bank would have thousands open with other banks and thus millions of users.
I think we need to remember that users will tend towards the easiest path. And something like the above will probably be it.
We could all use cash daily but most of the time we don’t. One of the main reasons banks exist is to make it easier to send/receive payments through things like cards/checks/wires/ach.
Why should we expect LN to be any different then what’s already happened.
Difference no. 1: LN is a scaling solution for bitcoin. Not for fiat. You are still only transferring 'bitcoins' over which your payment node, the bank, has no control like they have over fiat money.
Difference no. 2: Suddenly if the bank decides to shutdown or goes bankrupt, it won't forefeit your funds as a normal bank can. This changes the whole paradigm of banking as it makes these bitcoin-banks behave much more responsibly to keep their business. They cannot hold your bitcoin ransom like fiat.
Aren't these big enough reasons to support LN?
Moreover, If you see it positively then we can have a future where responsible bitcoiners with enough funds will act as nodes just like they act as escrows now anyways. Its just that they'll be much more trustless than even escrows.
Smaller nodes for smaller, low-fee microtransactions and bigger, wealthier nodes for higher transactions.
Yes I know LN scales bitcoin, but for the user, the currency ultimately doesn’t matter. If I buy bitcoin from Coinbase and they send the bitcoin to my payment channel that looks very similar to a checking account to the layperson. They won’t really understand the perceived nuance you are talking about -though it’s fundamentally what makes the blockchain valueable.
In the example I outlined the banks would have control since they could just close my channel allowing the balances to settle. If they are the super nodes (which I think they will be) and they won’t allow me to open a channel the network will be very hard to use day to day since I would be severely constrained by the size of channels I have open with others.
Ie. I wouldn’t really want/need to open a large channel with the random coffee shop that I visit 3 times a month.
Let’s take another example. Say I have a roommate that pays me .1 btc/mo for rent we would need to open a 3month channel (.3 btc) to make it worth it because that would mean we could bundle 3 transactions into 2 blockchain transactions.
It’s going to be hard for most people to fork over that level of cash. Especially if you need to open multiple channels like that -ie do I really have the btc to open a 3 month payment with my landlord? Probably not because I have a roommate to begin with.
Think about a business that employs 100 people. The business would need to have a lot of cash on hand to open up direct channels. So they will probably just open up one mega chan with their bank. The “bank”surely will require KYC to do this.
I’m a strong proponent of a decentralized store of value but my point is that ultimately the user won’t care if it’s btc+ln/ach/wire/visa/mpesa. They qjust need to be able to store value and send it to someone and will take the easiest path which I think will be centralization.
It’s not like the tech requires this, it’s more of a human nature thing.
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complain that bitcoin has too high fees, that you can't pay your coffee.
