Could the lightning network solve the block size problem?

[Elwar]

I watched the presentation on the lightning network and if it allows regular payments along with the option for this side enhancement then it could help a lot with the block size problem.

The lightning network basically allows people to set up payment nodes to run transactions which can be as many transactions as you want in a certain amount of time without touching the blockchain. At the end of the time period the final balance of the transaction is posted to the blockchain. The people running the nodes have no way to interfere with the transactions and it allows for more anonymity.

I am cautiously optimistic about it.

https://www.youtube.com/watch?v=-aI4inWxBwk

[Carlton Banks]

It also has it's critics, and the most troubling criticism I have heard is that it creates centralisation pressures amongst the Lightning miners. I haven't investigated any of it yet, haven't had time, but I will  do soon.

Link to the video you saw?

[Elwar]

It also has it's critics, and the most troubling criticism I have heard is that it creates centralisation pressures amongst the Lightning miners. I haven't investigated any of it yet, haven't had time, but I will  do soon.

Link to the video you saw?

Link is in the OP.

It does centralize because the nodes require a lot of bitcoins to run peoples' transactions. But if you have the option of lightning or the blockchain then you'd probably have specialized reasons for using lightning nodes. Such as microtransactions or some place that you do a lot of transactions with in a short amount of time.

[pedrog]

If bitcoin is going to scale to the moon we need all these options, we need bigger blocks and the lightning network and Xapo and Coinbase.

It can be argued that lightning network developers have an agenda to keep blocksize small in order to increase lightning network usage, don't know if true, but seems plausible.

[Carlton Banks]

Link is in the OP.

no excuses, I am a shameless skim reader sometimes.

Another criticism has been that it doesn't solve all scaling issues, but I've seen the early lightning concept explained by Joseph Poon a while ago, can't see why any of these criticisms make sense yet.

Edit: I think I see why.... this solution will work the hell out of every lightning transaction before it actually does get committed to the main chain, and those transactions are going to be complex mutlti-sig beasts. Does that really compress that much space? Could there be circumstances where it could possibly be more wasteful? Not sure yet

[RustyNomad]

If bitcoin is going to scale to the moon we need all these options, we need bigger blocks and the lightning network and Xapo and Coinbase.

It can be argued that lightning network developers have an agenda to keep blocksize small in order to increase lightning network usage, don't know if true, but seems plausible.

Agree, just like we have commercial banks, land banks, saving banks, retail banks, credit unions, building societies etc.... All perform essentially the same service but on different levels yet all tie back into the financial system.

So agree, we can do with these networks as long as they all tie back into the blockchain.

[Carlton Banks]

It also has it's critics, and the most troubling criticism I have heard is that it creates centralisation pressures amongst the Lightning miners. I haven't investigated any of it yet, haven't had time, but I will  do soon.

if you have the option of lightning or the blockchain then you'd probably have specialized reasons for using lightning nodes. Such as microtransactions or some place that you do a lot of transactions with in a short amount of time.

Hmmm, that implies it could be useful for permanent contractual arrangements, which could be set up on the main blockchain (with that "setup" transaction cleared on a decentralised network, with privacy intact if you wish), and then use the lightning network to keep the pissy details off the main blockchain. Ok.

[unamis76]

Lightning Network is a great idea. But the payment still has to go through the blockchain. To me it seems like a toll gate. The cars will still end up on the main road, so congestion is guaranteed.

[medUSA]

I see these sidechain solutions (like Lightning) AND offchain solutions (like Online Wallets) co-exist with blocksize increase in the bitcoin environment. That is how payment system work in the real world. Different systems are not mutually exclusive, VISA/Master/PayPal (and many others) co-exist in the banking environment. So, any solution is a nice idea, Lightning Network do not need to completely "solve" the block size problem.

[Eodguy149]

I watched the presentation on the lightning network and if it allows regular payments along with the option for this side enhancement then it could help a lot with the block size problem.

The lightning network basically allows people to set up payment nodes to run transactions which can be as many transactions as you want in a certain amount of time without touching the blockchain. At the end of the time period the final balance of the transaction is posted to the blockchain. The people running the nodes have no way to interfere with the transactions and it allows for more anonymity.

I am cautiously optimistic about it.

https://www.youtube.com/watch?v=-aI4inWxBwk

I am cautiously optimistic as well, the whitepaper is extremely promising for the lightning network but as of right now it has not been developed and because of this it cannot be a solution at the current moment. I am glad that the price hasn't exploded upwards because I believe that would exponentially increase usage which would cripple Bitcoin at the moment. This lull in volatility is allowing time for sidechain solutions to be developed.

[Elwar]

Lightning Network is a great idea. But the payment still has to go through the blockchain. To me it seems like a toll gate. The cars will still end up on the main road, so congestion is guaranteed.

Imagine BitPay and BitStamp having their own lightning connection open for 1 week. Imagine every purchase through BitPay gets sent to BitStamp via the Bitcoin lightning connection for that week. Each purchase gets converted to dollars and is added to BitPay's dollar account. Over the course of that week tens of thousands of transactions go through for a total of 100,000 bitcoins.

When the time expires on that connection the connection is closed and a single blockchain entry is added to the Bitcoin blockchain that BitPay has sent 100,000 bitcoins to BitStamp. One transaction as opposed to tens of thousands.

Same with microtransactions. You open up a wifi connection and pay per minute. You use the lightning connection and transfer .0001 bitcoins per minute that you are connected. You close your connection and the finally tally of .01 bitcoins is recorded on the blockchain for 100 minutes instead of 100 transactions recorded on the blockchain.

[johnyj]

To be honest, I have watched this video several times and never really understand how it works

The complexity in Lightning network will cause huge difficulty when they are trying to convince anyone without enough knowledge in that specific area

Even a simple block size change could create lots of confusion and conflict, lasting for years, such complex change would need at least 10 years to be accepted by the majority, maybe never

Of course if it does not touch the protocol then no one cares, but as I understand it must use a hard fork to implement those changes

Today centralized bitcoin financial institutions like exchanges and online wallet providers are already working well to a degree, and bitcoin network has become their settlement channel. This model works very well that it may not need another solution to increase the complexity. Besides, at small and local scale you don't necessary need trust less model, you even need some trust to humanize the user experience, many people have a habit to rely on authority, they can't live without authority

[Elwar]

I don't like the complexity in Lightning network. Because that will cause huge difficulty when you are trying to convince anyone without enough knowledge in that specific area

Even a simple block size change could create lots of confusion and conflict, lasting for years, such complex change would need at least 10 years to be accepted by the majority

Of course if it does not touch the protocol then no one cares, but as I understand it must use a hard fork to implement those changes

They said it was a soft fork...adding a time feature to the current code.

Bitcoin is already complex. When Bitcoin first came out we did not have phone apps to scan someone's QR code to send bitcoins. Similar easy to use services will do the same thing for the lightning network.

[Linuld]

I watched the presentation on the lightning network and if it allows regular payments along with the option for this side enhancement then it could help a lot with the block size problem.

The lightning network basically allows people to set up payment nodes to run transactions which can be as many transactions as you want in a certain amount of time without touching the blockchain. At the end of the time period the final balance of the transaction is posted to the blockchain. The people running the nodes have no way to interfere with the transactions and it allows for more anonymity.

I am cautiously optimistic about it.

https://www.youtube.com/watch?v=-aI4inWxBwk

I wonder why should we need another altcoin to fix bitcoin? Bitcoin can live on its own pretty fine when it would not have been artificially crippled with limits.

I think it's open how well the lightning network will work. I will not use it if i don't need it since i would prefer bitcoin being able to handle all the transactions i want to do.

[TheMage]

Lightning Network is a great idea. But the payment still has to go through the blockchain. To me it seems like a toll gate. The cars will still end up on the main road, so congestion is guaranteed.

Imagine BitPay and BitStamp having their own lightning connection open for 1 week. Imagine every purchase through BitPay gets sent to BitStamp via the Bitcoin lightning connection for that week. Each purchase gets converted to dollars and is added to BitPay's dollar account. Over the course of that week tens of thousands of transactions go through for a total of 100,000 bitcoins.

When the time expires on that connection the connection is closed and a single blockchain entry is added to the Bitcoin blockchain that BitPay has sent 100,000 bitcoins to BitStamp. One transaction as opposed to tens of thousands.

Same with microtransactions. You open up a wifi connection and pay per minute. You use the lightning connection and transfer .0001 bitcoins per minute that you are connected. You close your connection and the finally tally of .01 bitcoins is recorded on the blockchain for 100 minutes instead of 100 transactions recorded on the blockchain.

Technically, no service/merchant out there really needs this Lightning network. They can do this themselves already.

As johnyj said, im not really sure what they are doing aside from providing an aggregate solution with the "potential" to further centralize Bitcoin. I need to research this and ponder it for a bit. I do remember a while back seeing some initial slides stating that they needed blocks to be a max of 130ish or 150ish MB size? Anyone know or remember what im talking about? I cant seem to find the slides now.

[coinplus]

Lightning network may process more transactions per second so that we can go with current MB block itself. But lightning network needs thirty party incorporate into blockchain.

[johnyj]

Just read that white paper another time, now I get a rough idea about how it might work in reality:

First two entities establish a common deposit by each sending certain amount of bitcoin into an address, similar to two banks each opening an account in counterpart bank and credit the counterpart same amount of money

Then all the transactions between these two entities will just change the ratio of each party's ownership of this common deposit. At the end of the clearing period, they settle the difference by a blockchain payment to make the ratio 50/50 again

This can help two large institutions, it is not very practical for single average user because the required deposit and one way payment nature. It seems single average user would still need to rely on large institutions, and existing large institutions might use lightning network or establish the clearing channel through other arrangements

[bitgolden]

Lightning network will boost up the transaction processing time. It means the transactions get into a block is more quicker with aid of lightning network. So it would solve current block size debate.

[RoadTrain]

Just read that white paper another time, now I get a rough idea about how it might work in reality:

First two entities establish a common deposit by each sending certain amount of bitcoin into an address, similar to two banks each opening an account in counterpart bank and credit the counterpart same amount of money

Then all the transactions between these two entities will just change the ratio of each party's ownership of this common deposit. At the end of the clearing period, they settle the difference by a blockchain payment to make the ratio 50/50 again

This can help two large institutions, it is not very practical for single average user because the required deposit and one way payment nature. It seems single average user would still need to rely on large institutions, and existing large institutions might use lightning network or establish the clearing channel through other arrangements

I guess the most promising application of LN is where payments between entities are frequent and roughly predictable over the life of a channel. These might be BitPay<->Coinbase, but also it might be a man that routinely buys a cup of coffee somewhere in the morning, so setting up a channel between him and the cafe might make sense, especially because of near-instant 'confirmation'.

What you might be missing here is that all these channels can be chained together, forming a mesh-like network. In this case, you can have only one channel open, and send a payment to anyone in this network. This payment will be routed through intermediate hops right to the receiver.

The well-connected hops can be called hubs, and will receive a fee for their service. In theory, anyone can become a hub, it's only limited by how much BTC you have, i.e. how many channels can you fund with them.

[Lauda]

I see these sidechain solutions (like Lightning) AND offchain solutions (like Online Wallets) co-exist with blocksize increase in the bitcoin environment. That is how payment system work in the real world. Different systems are not mutually exclusive, VISA/Master/PayPal (and many others) co-exist in the banking environment. So, any solution is a nice idea, Lightning Network do not need to completely "solve" the block size problem.

This is a wrong statement. The Lightning network != sidechains. Sidechains are something entirely different that Blockstream is working on. I do agree with the rest of the thread. We need to implement everything in to grow the system.
Most of the posts about it are rubbish (not here in particular; in general). If there are centralization issues, we're better off having them with the Lightning network than with blocks (centralization and increased orphan rate). Now what the Lightning Network offers are near instant confirmations (trust-less), taking away a lot of the transaction volume off the main blockchain. It is supposedly even cheaper than using the blockchain. It has not been implemented yet but requires some changes soft fork changes. The Lightning Network should be fairly simpler than using sidechains (for new users).

Tl;Dr: The whole block size debate distracted us from actual solutions towards random people thinking that only increasing the block size is the best solution.