Something I don’t understand about lightning network and fees.

[Don Pedro Dinero]

Supposedly Lightning network will help scale bitcoin to the masses allowing small fast payments, but if you still have to pay a fee, I don’t see it.

Let’s say that Lightning network is already implemented in Starbucks and you order a $5 coffee. If you pay cash, you pay $5, if you pay with a debit or credit card, you pay $5 but if you pay with bitcoin you’re going to pay more than $5.

Are lightning network fees going to be ridiculous?

I suppose bitcoin enthusiasts won’t mind paying a fee but I think the masses aren’t going to be willing to pay anything extra, apart from those $5.

I only see two way to solve this, either fees are ridiculous, or shops have to be persuaded to accept the fee be charged to them, similarly to what happens with debit and credit cards.

How do you think it will work?

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[aleksej996]

I only see two way to solve this, either fees are ridiculous, or shops have to be persuaded to accept the fee be charged to them, similarly to what happens with debit and credit cards.

Fees will be lower using a LN compared to using credit/debit cards. Bitcoin transactions are generally cheaper than bank transactions.
LN will be even cheaper. Theoretically LN transactions could (and due to free market economy probably will) only cost in Internet bandwidth.

There is a lot of difference with LN and conventional payment methods. It is a very decentralized and permissionless system.
Competition will be higher and technology is faster and more modern. I believe it is reasonable to assume that LN will have smaller costs than credit cards.
As such, I don't see a reason why companies wouldn't prefer this method and therefor include it into a price and only charge more if you use credit cards.

[bob123]

Let’s say that Lightning network is already implemented in Starbucks and you order a $5 coffee. If you pay cash, you pay $5, if you pay with a debit or credit card, you pay $5 but if you pay with bitcoin you’re going to pay more than $5.

If you pay 5$ cash the shop receives 5$ (but does have the additional hurdle to count the money, secure it and funding their bank account).
If you pay 5$ via debit/cedit card the shop receives less than 5$ due to the fee they have to pay.
A shop could easily give a few cents (LN fees won't be higher than a few cents) discount on paying with crypto.

This way a shop would still make more money than via accepting credit cards.
And Cryptos don't lose value (unlike FIAT with steady high inflation).

Are lightning network fees going to be ridiculous?

Ridiculously small, yes.

I suppose bitcoin enthusiasts won’t mind paying a fee but I think the masses aren’t going to be willing to pay anything extra, apart from those $5.

As already mentioned. A shop makes profit by accepting cryptos over credit cards.

[Don Pedro Dinero]

Ok thanks for your replies, it is pretty clear now, otherwise it didn’t make sense.

The only difference I see is that for a shop to get a card terminal someone has to sell it to them, in this case banks, but many years ago salesmen were going around the shops.

In this case, do you think lightning network enthusiasts are going to go around explaining to the shops the advantages of accepting bitcoin? Or are we expecting them to accept bitcoin when they learn about the advantages themselves? In this second case, adoption will be slower. Probably much slower.

[TheQuin]

Ok thanks for your replies, it is pretty clear now, otherwise it didn’t make sense.

The only difference I see is that for a shop to get a card terminal someone has to sell it to them, in this case banks, but many years ago salesmen were going around the shops.

In this case, do you think lightning network enthusiasts are going to go around explaining to the shops the advantages of accepting bitcoin? Or are we expecting them to accept bitcoin when they learn about the advantages themselves? In this second case, adoption will be slower. Probably much slower.

I would think that small to medium sized businesses will always be on the lookout for ways to reduce costs. Typically they rent card terminals.

Example costs in UK.

Terminal Hire
Countertop Terminal £14 to £16 per month
Portable Terminal £17 to £21
Mobile Terminal £20 to £24

Transaction Fee
Debit Cards 0.25% to 0.35%
Consumer Credit Card 0.7% to 0.9%
Commercial Credit Card 1.6% to 1.8%

Chargeback Fee
£10-£20

Source: https://www.cardswitcher.co.uk/2017/01/card-payment-processing-fees/

That is going to add up to a hefty bill for any business.

When cards were first coming into use there was a need to sell the idea as being advantageous to cash despite the extra overheads of running it. Whereas LN will have the advantage of being a cost saving. We're still a long way from LN actually being a feasible alternative, but when it is it will sell itself.

[Kakmakr]

I think the real world advantages will not only be "coffee" purchases. You will more than make up for the less than 1 cent fee that you would be losing, with all the thousands of dollar you would have saved, when you did these micro transactions all over the world. You can now pay the same tx fee for that $5 purchase of the coffee, than what you would pay, if you bought something for $5 in another country.

The bigger picture is the total savings that you would be making on local and global micro payments.  ^smile^

[mu_enrico]

Supposedly Lightning network will help scale bitcoin to the masses allowing small fast payments, but if you still have to pay a fee, I don’t see it.
Let’s say that Lightning network is already implemented in Starbucks and you order a $5 coffee. If you pay cash, you pay $5, if you pay with a debit or credit card, you pay $5 but if you pay with bitcoin you’re going to pay more than $5.
Are lightning network fees going to be ridiculous?
I suppose bitcoin enthusiasts won’t mind paying a fee but I think the masses aren’t going to be willing to pay anything extra, apart from those $5.
I only see two way to solve this, either fees are ridiculous, or shops have to be persuaded to accept the fee be charged to them, similarly to what happens with debit and credit cards.
How do you think it will work?

Correct me if i'm wrong here, on LN the transaction fee only applied once at the time of closing payment channel.
When you are not closing your payment channel, you can pay for coffees many times without paying fees.
That said for example $1 fees for 50 cups of coffee sound great right?

[TheQuin]

Correct me if i'm wrong here, on LN the transaction fee only applied once at the time of closing payment channel.
When you are not closing your payment channel, you can pay for coffees many times without paying fees.
That said for example $1 fees for 50 cups of coffee sound great right?

No, there is an on-chain transaction fee to open or close a channel but there are also fees on the Lightning Network. These fees are tiny though and typically sub-satoshi amounts at the moment. As LN doesn't have scaling limitations in the same way a blockchain does, competition in the fees market should keep LN fees low.

[mu_enrico]

No, there is an on-chain transaction fee to open or close a channel but there are also fees on the Lightning Network. These fees are tiny though and typically sub-satoshi amounts at the moment. As LN doesn't have scaling limitations in the same way a blockchain does, competition in the fees market should keep LN fees low.

Thanks for clarifying, i think i miss-interpret the statement of "LN fee to be negligible" in various media.
So the fee still there but very-very small.

[DooMAD]

i think i miss-interpret the statement of "LN fee to be negligible" in various media.
So the fee still there but very-very small.

My interpretation is that LN fees are almost the inverse of on-chain fees, conceptually speaking.  With on-chain, it's the users who bid high to get into the next block as quickly as possible.  With LN, it's the node operators who charge as low a fee as possible in a "bid" to entice users to route through their channels.  Anyone who tries to charge too much will be undercut and won't earn any fees at all.

[Theb]

Ok thanks for your replies, it is pretty clear now, otherwise it didn’t make sense.

The only difference I see is that for a shop to get a card terminal someone has to sell it to them, in this case banks, but many years ago salesmen were going around the shops.

In this case, do you think lightning network enthusiasts are going to go around explaining to the shops the advantages of accepting bitcoin? Or are we expecting them to accept bitcoin when they learn about the advantages themselves? In this second case, adoption will be slower. Probably much slower.

Even convince merchant to accept Bitcoin (on-chain) as payment method is difficult, so i think LN enthusiasts/community would focus to make Bitcoin merchants to use LN for now.
Once LN is "ready" for most bitcoiner and there are friendly wallet for both user/customer and merchants, LN enthusiasts/community would start convince merchants to accept Bitcoin (on-chain and LN)

Agreed, we can't obviously go down the way of what banks are doing in offering their credit/debit cards to be accepted in shops, Bitcoin unlike banks are not companies where both can have a mutual agreement on their businesses. The only way I see Bitcoin to be accepted by shops is if they see that LN has totally improved om lowering the transaction cost, we all know before that some online shops pulled out and removed their Bitcoin payment option in their stores because of the ridiculously high fees, fees that are so high that no customer is stupid enough to use Bitcoin to purchase something online. Additionally after having lower fees businesses must see that there is a demand for Bitcoin as a payment method and they will see this as a opportunity to also accept BTC as one of their payment options.

[r1s2g3]

The debate that shop will use LN or not  is of no purpose if  cost of coffee is $5. (or whatever amount in any fiat currency.)
First cost of coffee need to fixed in satoshis and everyday I pay same amount of satoshis to buy that coffee.  (using $5 as example my satoshi payment differ every day).

I do not think business can work on volatile rate of bitcoin (in terms of fiat). First we need the system where everything will be decided to satoshi.(I want to emphasize that first I need to make sure cup of coffee cost 1k satoshi and if using fiat,I will pay what it takes to buy 1k satoshis instead to taking value of coffee at $5 and then finding satoshi payment ).

If used,LN will be fast and cheap (as it will be not using blockchain to write every tansactions ) and no need to worry about international transaction charge, if you travel multi country.

[DooMAD]

The debate that shop will use LN or not  is of no purpose if  cost of coffee is $5. (or whatever amount in any fiat currency.)
First cost of coffee need to fixed in satoshis and everyday I pay same amount of satoshis to buy that coffee.  (using $5 as example my satoshi payment differ every day).

I do not think business can work on volatile rate of bitcoin (in terms of fiat).

That may be one of those "chicken or egg" scenarios.  It remains to be seen whether volatility decreases naturally as adoption begins to increase, or whether a reduction in volatility is a prerequisite for adoption to start increasing.  I tend to lean more towards the former.

The only way I see Bitcoin to be accepted by shops is if they see that LN has totally improved om lowering the transaction cost, we all know before that some online shops pulled out and removed their Bitcoin payment option in their stores because of the ridiculously high fees, fees that are so high that no customer is stupid enough to use Bitcoin to purchase something online. Additionally after having lower fees businesses must see that there is a demand for Bitcoin as a payment method and they will see this as a opportunity to also accept BTC as one of their payment options.

Indeed.  It's likely that fees are a bigger psychological barrier than the volatility.  That's not to say we shouldn't worry about the volatility, but I think it's reasonable to assume that once the emphasis has shifted away from Bitcoin being a purely speculative asset, the volatility will become less of an issue when people use it more like a currency.