Bitcoin may need to be HIGH-VOLUME digital cash to survive

[jonald_fyookball]

Those that want Bitcoin to be (or think Bitcoin can be)
only a highly secure store of value (like Gold or a reserve currency),
without also being a high volume digital cash
used for buying coffee, are making some assumptions
that may be erroneous.


Potentially Erroneous Assumption #1:  Bitcoin will remain
a store of value without widespread use. 

The idea is that as long as Bitcoin is secure and has a good reputation,
large parties can transact millions of dollars and Bitcoin
will hold its value even if merchants don't accept it for coffee.

But if it doesn't have widespread use, it loses one of the key
properties of money.  And it becomes more like tulip bulbs.

Potentially Erroneous Assumption #2:  There will be
a healthy fee market for a low volume Bitcoin.

Eventually, fees (rather than block reward subsidies) will fund security
for the blockchain. 

Currently, Bitcoin users' fees are not dependent
on the amount of the transaction.  Therefore, with
only a few high-dollar transactions rather than a great
many transactions of all sizes, there will be far fewer
fees (and thus far less security) assuming that this
convention continues of 'amount-independent fees'.

Bitcoin could always adopt a new convention and charge
a percentage of the total transaction, but would be
subject to intense competition from other cryptocurrencies.

For example if the fee was lets say 1% and I wanted to send $1M,
why I would I pay $10,000 with Bitcoin when i could do it
for far less with another coin?

Additionally, these 2 assumptions are related because if we're
going to have a Bitcoin without widespread use as a store of
value, then it needs to have even higher security, since that
will become the dominant property which gives it value.

[HabBear]

I respectfully disagree with you. I think you're making some erroneous assumptions. Please allow me to explain...

Potentially Erroneous Assumption #1:  Bitcoin will remain
a store of value without widespread use. 

But if it doesn't have widespread use, it loses one of the key
properties of money. 

You question whether Bitcoin can survive as an investment, a store of value, rather than a currency. I believe it can. And this first "Erroneous Assumption" is itself erroneous because you state that if Bitcoin doesn't have widespread use it loses one of the key properties of money. BUT, that's precisely OK because if Bitcoin is to survive as an investment it will in fact not be money.

• Stock, real estate, and precious metals are all stores of value, yet none have the properties of money

Potentially Erroneous Assumption #2:  There will be
a healthy fee market for a low volume Bitcoin.

Bitcoin could always adopt a new convention and charge
a percentage of the total transaction, but would be
subject to intense competition from other cryptocurrencies.

The concern about rising fees once the blocks become smaller or cease to available for mining is an important one. But people keep focusing on the wrong elements of it. The current belief is that transaction fees will rise once bitcoin can no longer be mined because Miners will need to be compensated for their work. The resolution can be found when we eliminate miners from their role. The miners are providing computing power and conducting math to verify transactions. The math can be automated on the blockchain and the computing power could be extracted from people accessing the blockchain for transactions. The system isn't built this way currently, but over the next 100 years it certainly could be.

The error I see in your thinking is that you presume that evolution cannot occur. Yet every successful thing in our world (except for maybe the pencil) has required evolution to succeed. Bitcoin will be no different.

[pooya87]

i sometimes don't get people around here!
from day one, even in the white paper, bitcoin is called a digital cash, a currency, money, and all the other synonym words saying bitcoin is money. then lately these days specially after the block size debate is heated up you can see comments saying bitcoin should be an investment! and it is not supposed to be a currency at all!

i am not saying we will compete with biggest ones out there and i am not saying it should be used to buy coffee. but we need to see some scaling, more people come in so we need to be able to handle all of them, simple as that.

[xSkylarx]

Bitcoin doesn't need to be something like High-Volume digital cash to survive, because it is still surviving right now just the way bitcoin is. Bitcoin started in just a very low price cryptocurrency, but still, many people are using it since then, and right now, bitcoins population is still rising because of its value, and it will be a HIGH-VOLUME digital cash soon because that is the real target of bitcoin, to be superior amongst all the Altcoins here in the crypto-world, and they can never beat bitcoin.

In order bitcoin to survive, bitcoin don't need to be something that much, what is important is people are still using it, that's what is important, because without bitcoin users, there will be no more bitcoin right now.

[xypos]

What makes something a good store of value isn't actually if something is instrinsically a store of value or not, it is the perception of the public whether or not the item in question is valuable and a good store of value or not.

Take precious metals for example, you cannot do anything with it. You can't eat it, you can't drink it. When you're out in the wilderness and you get attacked by some animal you can't use it to defend yourself. But people trust in the value of gold, that's why it has a relatively stable performance over the past several centuries.

So if we can get more people educated about bitcoin, it would make sense that bitcoin price becomes less volatile, and will rise more in line in the inflation rate.

Bitcoin has a big future ahead of itself.

[ebliever]

There are plenty of examples of things that are stores of great value, that have _extremely_ low transaction volumes, and yet persist as a store of value. Collectibles, for example. Artwork, stamps, antiques, classic cars, numismatics, you name it.

So I'm pretty sure we don't _need_ a high volume for bitcoin to survive or thrive.  But I'll agree that high volume trumps low volume, especially as it relates to fees. And I'd like cryptocurrency to be more than just digital gold.

[Holliday]

There are plenty of examples of things that are stores of great value, that have _extremely_ low transaction volumes, and yet persist as a store of value. Collectibles, for example. Artwork, stamps, antiques, classic cars, numismatics, you name it.

So I'm pretty sure we don't _need_ a high volume for bitcoin to survive or thrive.  But I'll agree that high volume trumps low volume, especially as it relates to fees. And I'd like cryptocurrency to be more than just digital gold.

Indeed, the gold standard of stores of value, gold itself, has low transaction volumes and certainly doesn't have widespread use (as a currency at least)!

Also, if we can reach high volumes of transactions with a layer on top of the existing network, preserving the properties that make Bitcoin a highly secure store of value while also allowing for coffee purchases, isn't that a win-win scenario?

[dinofelis]

Those that want Bitcoin to be (or think Bitcoin can be)
only a highly secure store of value (like Gold or a reserve currency),
without also being a high volume digital cash
used for buying coffee, are making some assumptions
that may be erroneous.

Buying coffee with bitcoin is going to be ridiculous.  A block chain based crypto simply can't in the next 10-20 years.  It simply doesn't scale well.  What you CAN do, is to build banks on top of bitcoin (like the lightning network) and to trade bitcoin IOU for coffee, only settling between banks "every other day" on the block chain.  Bitcoin is then like the central bank.  You don't use a central bank account to pay coffee.  You use your commercial bank who has given you central bank IOU (called "a banking account").   And banks settle through their central bank accounts.  But why would you prefer to use a bank on top of bitcoin, instead of a bank on top of a national currency, if prices are denominated in national currency and you have an exchange risk ?

So no, *general currency use* in everyday life with a crypto currency is simply not possible.  That was the salesman snake oil they sold you.  But no block chain crypto can handle that.  A block chain crypto is seriously impaired as compared to trusted fiat currencies (such as banking currencies), because the burden of "trustless, decentralised" make it heavy, clumsy, etc...

Crypto can only be used in those cases where using fiat is problematic.  When fiat is easy to use, crypto is not competitive.

So forget that.

Potentially Erroneous Assumption #1:  Bitcoin will remain
a store of value without widespread use. 

The idea is that as long as Bitcoin is secure and has a good reputation,
large parties can transact millions of dollars and Bitcoin
will hold its value even if merchants don't accept it for coffee.

Bitcoin's current value proposition is the influx of money from greater fools.   Most bitcoin buyers buy it "because it will rise".  That is greater fool theory.  You need greater fools streaming in to buy it and think they will be able to sell it for even more.

This greater fool theory (also called "adoption") can last still quite a while, so I'm confident that bitcoin's value proposition will still be valid for quite a while.  

If bitcoin were used as a currency and as a currency only, then Fisher's formula would give its price, and I think it would be of the order of 10 dollars a coin or less.

[dinofelis]

Also, if we can reach high volumes of transactions with a layer on top of the existing network

That's called a banking network.  It can only work through centralization.  LN hubs are banks, knowing you, knowing what you do, and blocking what you want to do eventually, reporting you, asking you to pay for their services.... like normal banks.  If you are fine with that, why not use normal banks and fiat ?  It works since ages.

[aso118]

Even if Bitcoin does survive as only a store of value, I will be disappointed because of its potential, which hasn't been realized. Increasing the block size or the number of transactions which can be processed would open up bitcoin adoption to a wider range of people. This would definitely have a positive impact on the price.

[royalfestus]

There are plenty of examples of things that are stores of great value, that have _extremely_ low transaction volumes, and yet persist as a store of value. Collectibles, for example. Artwork, stamps, antiques, classic cars, numismatics, you name it.

So I'm pretty sure we don't _need_ a high volume for bitcoin to survive or thrive.  But I'll agree that high volume trumps low volume, especially as it relates to fees. And I'd like cryptocurrency to be more than just digital gold.

Every recent challenges showed that bitcoin has what he needs to survive. If I never believe that before I now do. It will grow with time to achieve everything is made for. It has a good will even among those who can damage it. Time will give us what we want, It is still young as a decentralized entity

[Capradina]

Even if Bitcoin does survive as only a store of value, I will be disappointed because of its potential, which hasn't been realized. Increasing the block size or the number of transactions which can be processed would open up bitcoin adoption to a wider range of people. This would definitely have a positive impact on the price.

Hmm, I do not know how long until the bitcoin stand. Because the bitcoin is products, where each product could be bankrupted if can't fix any problems that arise. Are you sure you increase the block size could make a bitcoin become better again ..?? because I see this current block improvement of making everyone think that bitcoin will fall, because the fee is done is also too high. Just wait and look for profit in it
 

[Holliday]

Also, if we can reach high volumes of transactions with a layer on top of the existing network

That's called a banking network.  It can only work through centralization.  LN hubs are banks, knowing you, knowing what you do, and blocking what you want to do eventually, reporting you, asking you to pay for their services.... like normal banks.  If you are fine with that, why not use normal banks and fiat ?  It works since ages.

I don't care about high transaction volume with Bitcoin in the slightest, but I'm willing to accept that some do. As long as it's built on a layer that does not harm the existing network, I could care less. We are in agreement.

Imagining that we can have censorship-proof micro-transactions for sub-pennies with a system that requires full nodes to maintain a ledger which must record every transaction since it's creation is absurd to me!

Every transaction does not need to be censorship-proof as long as the option exists.

I use fiat (credit cards as well) all the time and have absolutely no desire to use Bitcoin for daily, mundane purchases.

[NeuroticFish]

For the blockchain security to not be affected in a bad way after the block reward become zero, there are 2 options:

1. The transaction volumes much bigger than now.
2. Bitcoin price much higher than now.

If the miners can pay for the electricity and get some small profit too, the network will be okay.

I feel like SegWit believers hope for a super high price for Bitcoin and BU team hopes to increase the volumes to the sky.

Usually the truth is in-between.

[dinofelis]

i sometimes don't get people around here!
from day one, even in the white paper, bitcoin is called a digital cash, a currency, money, and all the other synonym words saying bitcoin is money. then lately these days specially after the block size debate is heated up you can see comments saying bitcoin should be an investment! and it is not supposed to be a currency at all!

The thing is: it is hopelessly naive to think that a block chain based crypto currency can be, well, a daily currency.  The idea that every transaction, everywhere, has to be copied all over the world and remembered for ever, makes that this burden is making this totally non-competitive with respect to fiat money.  The trustlessness aspect of crypto makes it clunky compared to the lean payment systems of trusted systems like fiat.  You simply can't compete.  The resource hog in networking, storage and processing that trustlessness requires is at this moment, making that crypto cannot scale to be a daily currency at large usage potential.  In a few decades, maybe.  But not now.  1 MB blocks means 3 coffees bought per second IN THE WHOLE WORLD.
100 MB blocks means 300 coffees bought per second in the whole world.

[jonald_fyookball]

There are plenty of examples of things that are stores of great value, that have _extremely_ low transaction volumes, and yet persist as a store of value. Collectibles, for example. Artwork, stamps, antiques, classic cars, numismatics, you name it.

So I'm pretty sure we don't _need_ a high volume for bitcoin to survive or thrive.  But I'll agree that high volume trumps low volume, especially as it relates to fees. And I'd like cryptocurrency to be more than just digital gold.

Indeed, the gold standard of stores of value, gold itself, has low transaction volumes and certainly doesn't have widespread use (as a currency at least)!

Also, if we can reach high volumes of transactions with a layer on top of the existing network, preserving the properties that make Bitcoin a highly secure store of value while also allowing for coffee purchases, isn't that a win-win scenario?

Gold's been around for thousands of years and Bitcoin has what -- 1% of its market cap?

Gold is in widespread use overall and was used for currency for a long time. 

[jonald_fyookball]

Bitcoin doesn't need to be something like High-Volume digital cash to survive, because it is still surviving right now just the way bitcoin is.

...because of its first mover advantage and expectations from investors that it will scale.

If it doesn't, other cryptos will outcompete it.

[pereira4]

Those that want Bitcoin to be (or think Bitcoin can be)
only a highly secure store of value (like Gold or a reserve currency),
without also being a high volume digital cash
used for buying coffee, are making some assumptions
that may be erroneous.


Potentially Erroneous Assumption #1:  Bitcoin will remain
a store of value without widespread use. 

The idea is that as long as Bitcoin is secure and has a good reputation,
large parties can transact millions of dollars and Bitcoin
will hold its value even if merchants don't accept it for coffee.

But if it doesn't have widespread use, it loses one of the key
properties of money.  And it becomes more like tulip bulbs.

Potentially Erroneous Assumption #2:  There will be
a healthy fee market for a low volume Bitcoin.

Eventually, fees (rather than block reward subsidies) will fund security
for the blockchain. 

Currently, Bitcoin users' fees are not dependent
on the amount of the transaction.  Therefore, with
only a few high-dollar transactions rather than a great
many transactions of all sizes, there will be far fewer
fees (and thus far less security) assuming that this
convention continues of 'amount-independent fees'.

Bitcoin could always adopt a new convention and charge
a percentage of the total transaction, but would be
subject to intense competition from other cryptocurrencies.

For example if the fee was lets say 1% and I wanted to send $1M,
why I would I pay $10,000 with Bitcoin when i could do it
for far less with another coin?

Additionally, these 2 assumptions are related because if we're
going to have a Bitcoin without widespread use as a store of
value, then it needs to have even higher security, since that
will become the dominant property which gives it value.

No coin can scale at worldwide levels while allowing coffee-tier fast and cheap transactions onchain without massive node centralization.

Gold-tier transactions and long term storage = on-chain
Coffee-tier fast velocity big volume transactions = off-chain

Those are the objective facts. If there was a coin that could offer fast, cheap, massive volume onchain transactions while maintaining a small block size so people can run nodes to guarantee a decentralized network then whoever creates that becomes the next bill gates overnight and I retire in some island with a couple billion dollars from a small 10 buck investment. Unfortunately that is sci-fi today, so best we got is Core + segwit + LN.
You can't call something cash if the nodes are so big that the network becomes centralized, and you would need huge blocks to cater for coffee-tier mainstream level transactions.

Those are the facts that delusional big blockers fail to realize.

[jonald_fyookball]

Those are the objective facts. my opinions

FTFY

[dinofelis]

No coin can scale at worldwide levels while allowing coffee-tier fast and cheap transactions onchain without massive node centralization.

Gold-tier transactions and long term storage = on-chain
Coffee-tier fast velocity big volume transactions = off-chain

You are perfectly right.

The problem with "off chain" transactions is that this is nothing else but BANKING, that is, trust centralized entities with your IOU of bitcoin.   Now I know that with the LN, it seems that you still have control.  To a certain degree, yes.  But in order for you to be able to use the LN, you have to set up a payment channel to your local "big LN hub".  Indeed, to hope to be able to transact a few times a year through the LN, you have to have a reliable and well connected LN partner.  Otherwise, the channel will (have to) be settled on the chain before you even get to do a transaction, with useless fees to be paid.  Also, for your LN node to be able to reach your counter party, you need to have a well-connected hub ; which means, that that hub has to "freeze" a lot of BTC in a lot of channels to other "professional" hubs until it gets at destiny.  Each transaction implying a potential settlement and fee cost, using the LN with, say, 20 jumps to destiny will involve paying sufficient fees to the intermediate hubs as "insurance fee" so that the use of the channels and the risk of settlement (and on chain fee cost, time lost and so on) is compensated.

In fact, I don't even see how the LN could "kick off" except by a very rich guy in bitcoin, setting up several of his OWN hubs setting up channels between them.  Possessing several LN hubs by a big entity has a large scale advantage: there will not be many settlements on chain, as the hubs belong to one and the same entity.  

As such, you will probably get A FEW world-wide banking networks that take on the LN traffic "inside" and only have channels between them if "sender" and "receiver" are on different banking networks.  You having set up your small LN channel to one bank, you have to settle on chain to go elsewhere.  In order to even be able to connect, those bankers may ask you for a collateral, so that in case of settlement on your side, they keep your collateral.  They may use that collateral to ask for a subscription fee to keep open the channel.  

This is simply normal banking.

Those are the facts that delusional big blockers fail to realize.

I think that "big blockers" simply don't want *artificial* limits to on chain transactions, and let the technology limits and costs do their market work.  That said, in my opinion, bitcoin is, once and for all, a 1MB limited block crypto, in the same way that there won't be more than 21 million bitcoins.

This is simply the problem of single block chain currencies.  They weren't designed that way.

[ebliever]

Those are the objective facts. my opinions

FTFY

If you are going to dispute what he says, it would be helpful if you could show how he is wrong. It rather looks to me like the facts are on his side, and your opinion is only that. Given storage limitations for the foreseeable future how can you believe a cryptocurrency can keep transactions on-chain while scaling up massively from the current state?

[Carlton Banks]

Also, if we can reach high volumes of transactions with a layer on top of the existing network

That's called a banking network.  It can only work through centralization.  LN hubs are banks, knowing you, knowing what you do, and blocking what you want to do eventually, reporting you, asking you to pay for their services.... like normal banks.  If you are fine with that, why not use normal banks and fiat ?  It works since ages.

No, not like banking at all. Hubs may well develop naturally, but they're not the network model for Lightning, one can just as easily find one's self connected to a very large Bitcoin node, that does not mean Bitcoin is centralised around 1 well connected node. Lightning is also peer-2-peer, no different to Bitcoin.


If there is no-one forcing anyone to use certain LN nodes, and the only barrier to entry is running a Bitcoin full node, I'm failing to see any loss of control, or any centralisation in that.

[Matthias Green]

Well powers of individual gadgets are growing, so if any device, for example, contains a dedicated portion of calculation power to permanently maintain hashing, and with the development of wireless energy, it may look possible. But the face of the entire industry will change with the help of such means.  

[dinofelis]

No, not like banking at all. Hubs may well develop naturally, but they're not the network model for Lightning, one can just as easily find one's self connected to a very large Bitcoin node, that does not mean Bitcoin is centralised around 1 well connected node. Lightning is also peer-2-peer, no different to Bitcoin.

Using LN has only a meaning if you send many transactions through the same channel.  If you do this P2P, then this is just the old "micropayments".  LN only has a meaning if you get further away than one hop.  If you are not immensely rich in BTC, you cannot keep open a lot of channels with enough coins to a lot of peers, without having to settle after a few transactions.  If off-chain transactions are orders of magnitude more frequent than on-chain transactions (with high fees), your channels should, on average, transmit that number of transactions before settling, otherwise you will lose out.  Your settling fees per channel will be divided by the number of transactions you can get through a channel to give you the cost per transaction to you.  You see the huge economies of scale here.  The bigger the hubs are, the better fees they can offer, the better they can guarantee that they will be able to transact.  Also, the better the connections are between the hubs your transaction will use, the better it works.  In fact, ONE CENTRAL BIG HUB with all people connected to it would be the optimal LN.

If there is no-one forcing anyone to use certain LN nodes, and the only barrier to entry is running a Bitcoin full node, I'm failing to see any loss of control, or any centralisation in that.

Because opening a channel is locking in your coins until settlement, which means paying a (big) fee on-chain, and transmitting a transaction can induce a settlement on another channel (and its inherent fee risk).  You can also not use the same coins on different channels.

If you, as a small fish, set up, say, 8 channels to 8 other nodes, you can only lock in at most 1/8 of your bitcoin holdings into each of the channels, which will settle each time your unknown other node settles, and which will settle each time the sum of transactions you treated go beyond 1/8 of your holdings.

[RodeoX]

I used BTC as cash when it traded for pennies and I use it at it's current valuation. Works just the same. It's money because that's how I use it. I can't see anyone convincing me otherwise while this is still true.

[jonald_fyookball]

Those are the objective facts. my opinions

FTFY

If you are going to dispute what he says, it would be helpful if you could show how he is wrong. It rather looks to me like the facts are on his side, and your opinion is only that. Given storage limitations for the foreseeable future how can you believe a cryptocurrency can keep transactions on-chain while scaling up massively from the current state?

We don't know all the ways that a cryptocurrency can scale, how long it will take to reach 'world wide levels' , what kinds of bandwidth technology will be available in the future.  Heck we can't even agree on what constitutes node centralization. So to make a blanket statement that "it cant be this or that" is presumptive.

[dinofelis]

We don't know all the ways that a cryptocurrency can scale, how long it will take to reach 'world wide levels' , what kinds of bandwidth technology will be available in the future.

If your statement is that one doesn't yet know all ways, beyond "writing all transactions in a single block chain", to make a crypto currency, *you are perfectly right*.  This "writing all transactions in a single big block chain" was a first idea, introduced by Satoshi, on which most alt coins today are based too, and THIS kind of crypto currency, CLEARLY HAS SCALING PROBLEMS.

I think that Moore's law is a good indication of future technological growth at best.  In order for such a crypto currency to be able to swiftly deal with most daily transactions in the world, we need about 5 orders of magnitude.  Because VISA and Mastercard are NOT handling all the transactions in the world either, and are 4 orders of magnitude higher in transactions per second.  But there are a lot of other payments, coffee is typically done with cash. 

5 orders of magnitude with Moore's law requires about 25-30 years.  So, 30 years from now, block chains where we write all transactions like with bitcoin, are going to be able to deal with all transactions world wide.  Over 30 years, most of the currently existing crypto currencies will have run in fundamental problems, and be entirely centralized.

But it will not take 30 years to discover smarter ways to do crypto payments without having this burden.  There ARE schemes in development which can do the essential function of crypto in much leaner ways.

[Carlton Banks]

ONE CENTRAL BIG HUB with all people connected to it would be the optimal LN.

All good, except this part. That's not "optimal", that's "cheapest", which are separate concepts.

You will have a choice. Don't need super high levels of privacy to buy a packet of chewing gum? Then use a larger channel to save on fees (and who says the street vendor will let you use that large channel without sending it through THEIR node first? Everyone competes on a level playing field, as there is no real barrier to be a Lightning network node)

Because opening a channel is locking in your coins until settlement, which means paying a (big) fee on-chain, and transmitting a transaction can induce a settlement on another channel (and its inherent fee risk).  You can also not use the same coins on different channels.

If you, as a small fish, set up, say, 8 channels to 8 other nodes, you can only lock in at most 1/8 of your bitcoin holdings into each of the channels, which will settle each time your unknown other node settles, and off which will settle each time the sum of transactions you treated go beyond 1/8 of your holdings.

No, you've already accepted that aggregating multiple LN transactions into 1 on-chain transaction will allow far more transaction capacity, which will shift the more meager capacity away from the on-chain Bitcoin network. Settlement fees could end up cheaper than today's transaction fees no problem. Settlement transactions are hardly highest priority, and that together with the effects of some capacity shifted onto LN will create positive and immutable incentives to keep on-chain AND off-chain transaction relatively cheap. Fewer people needing on-chain tx's naturally frees up on-chain capacity.

The positive incentive to settle to one's detriment doesn't exist, all honest participants will want to save money, not cost themselves and others unnecessary fees. Of course, people could use malign incentives to deliberately close channels earlier than makes economic sense, but it's not like Bitcoin miners are just nice people wanting to help everyone out right now, our current 3rd parties are also being uncooperative and obstructive towards the network's best interests. If anything, LN improves that situation, as we can choose who processes our LN transactions, and deny business to those who want to be anti-social or destructive.

[dinofelis]

ONE CENTRAL BIG HUB with all people connected to it would be the optimal LN.

All good, except this part. That's not "optimal", that's "cheapest", which are separate concepts.

Same notion.

You will have a choice. Don't need super high levels of privacy to buy a packet of chewing gum? Then use a larger channel to save on fees (and who says the street vendor will let you use that large channel without sending it through THEIR node first? Everyone competes on a level playing field, as there is no real barrier to be a Lightning network node)

It would be totally ridiculous to have to set up a LN channel for a single payment, because setting up a LN channel will at least involve ONE on-chain payment.  So this is nothing else but an on-chain transaction.

I'm not talking about privacy.  With bitcoin being a transparent ledger, there is no privacy with on-chain transactions.  LN and banking is more private than on-chain bitcoin.  Use monero or something like that if you need privacy in crypto.  Don't use bitcoin.  So this is not the issue.  The point with banking is that banks impose rules, impose fees, impose restrictions, impose reporting, impose a lot of things.  If you are OK with all these things, FIAT BANKS are better than "guy on the internet" banks.  There's nothing that LN can offer, that normal fiat banks can't offer.

Crypto, with all its burden, has an edge over fiat in those cases where fiat cannot be used.  But this edge is entirely lost with a LN banking layer.  The fiat banking layer works better than the LN banking layer ever can.

No, you've already accepted that aggregating multiple LN transactions into 1 on-chain transaction will allow far more transaction capacity, which will shift the more meager capacity away from the on-chain Bitcoin network. Settlement fees could end up cheaper than today's transaction fees no problem.

If your transaction on the "amateur LN network" needs, say, 20 hops to get to destination, that would mean that ON AVERAGE, every amateur LN channel needs to process at least 20 transactions in order even to BREAK EVEN with on chain transactions.  That means that ON AVERAGE, every amateur LN channel needs to have locked in at least 20 times the average amount of a transaction.  

If, on average, a LN transaction is, say, $50,- and every amateur node has, say, 8 links to its neighbours, and it takes 20 hops to get to destination, that means that I need to lock in $8000,- on my node, to break even: in that case, a LN transaction will be just as expensive as an on chain transaction.  If I need to offer 10 times smaller fees, I need to lock in $80 000,- and hope I'll not have too many spurious settlements or I'm losing money on fees.

Settlement transactions are hardly highest priority, and that together with the effects of some capacity shifted onto LN will create positive and immutable incentives to keep on-chain AND off-chain transaction relatively cheap. Fewer people needing on-chain tx's naturally frees up on-chain capacity.

Nope.  Settlement transactions are extremely urgent, because they have to be locked in before they expire.  And they lock in my havings.
The chain will be full of settlement transactions, because that's the scaling idea.  

Remember, if on average a LN transaction needs 20 hops, every channel needs to process at least 20 transactions before settlement in order to have a lower rate of settlement transactions on chain than if the transactions were simply executed on chain directly.

You can get your channels much longer open if you have BIG amounts and a lot of traffic in both ways.  Again, this gives a HUGE economy of scale for big hubs.

What fool is going to lock in his bitcoins into channels if he doesn't have mountains of them, with almost no hope to get something out of it, and with a high risk of it costing him money, and not having his coins available when he needs them ?

[dinofelis]

The positive incentive to settle to one's detriment doesn't exist, all honest participants will want to save money, not cost themselves and others unnecessary fees.

Well, if you suddenly see a lovely pair of shoes you want to buy, and your bitcoins are locked in a channel, you settle the channel to be able to buy them.  Too bad for your counterparty.

[jonald_fyookball]

But it will not take 30 years to discover smarter ways to do crypto payments without having this burden.  There ARE schemes in development which can do the essential function of crypto in much leaner ways.

I'd be interested to hear about these schemes.

It's a little disappointing to see defeatist attitudes and limiting beliefs when we should be inspired by Satoshi to think outside of the box.

[dinofelis]

I'd be interested to hear about these schemes.

Well, to give you an idea, Byteball has something else than a block chain.  The system is not entirely well-designed and has a lock-in danger, and it contains other problems.  But it contains a significant conceptual step.   I'm myself also exploring something of the kind, but it is still way way too early to talk about it, as I may be entirely wrong, but there's more than just one way of "keeping accounts", and recording all transactions of everybody is not the only way.

[Kprawn]

Did Satoshi create this to be a Store of Value or a alternative digital P2P payment option? I think his vision was to replace banks & eventually fiat

currencies and to scale this to enable that function. The fees should increase over time to replace the Block reward, and for that to happen... you

will need MASS adoption.  ... I think you made a valid statement. 

[dinofelis]

Did Satoshi create this to be a Store of Value or a alternative digital P2P payment option? I think his vision was to replace banks & eventually fiat

The problem is that the technique he invented can't handle this, and this was pointed out to him already early on.  But as he didn't know anything better, he made bitcoin.  Which was a very good start as a first working crypto.  What was a bigger blunder, was that he didn't fully grasp the consequences of his own invention of trustless consensus, and that he has frozen in a parameter (1MB blocks) without realizing that it was frozen in.

[Carlton Banks]

The positive incentive to settle to one's detriment doesn't exist, all honest participants will want to save money, not cost themselves and others unnecessary fees.

Well, if you suddenly see a lovely pair of shoes you want to buy, and your bitcoins are locked in a channel, you settle the channel to be able to buy them.  Too bad for your counterparty.

It would make much more sense to buy the shoes with the money in the channel? If you have money in a channel, it can be routed to anywhere else on the Lightning network, that's how Lightning is designed. You basically don't get LN. Not my problem, I'm afraid.

[AngryDwarf]

If there is no-one forcing anyone to use certain LN nodes, and the only barrier to entry is running a Bitcoin full node, I'm failing to see any loss of control, or any centralisation in that.

I thought the idea of segwit was that people could use LN without running a full node. Or do we need to shrink full nodes so that they can be run on a mobile phone?

[Carlton Banks]

If there is no-one forcing anyone to use certain LN nodes, and the only barrier to entry is running a Bitcoin full node, I'm failing to see any loss of control, or any centralisation in that.

I thought the idea of segwit was that people could use LN without running a full node. Or do we need to shrink full nodes so that they can be run on a mobile phone?

Just like the difference between full nodes and SPV nodes, you can run Lightning nodes either using a full node or using a lite node. Appropriate trade-offs apply, again, just like they do with lite nodes and full nodes. i.e. there's a desktop version with more capabilities that uses more resources, and a version with stripped down capabilities with stripped down resources to use it.