Bitcoin Is In Peril Due To The Centralization Of 2nd Layer Scalability Solutions

[CypherpunkLabs]

Bitcoin is in dire need of a scalability solution, since its 10 minute confirmation times and 1 MB block size makes it incapable of handling even a small fraction of global retail transactions, with the ultimate result being that Bitcoin is barely used as a real-life currency and is instead intimately linked to fiat. In an attempt to fix this, 2nd layer scalability solutions like the Lightning Network and Liquid have been developed, but these are centralized and could theoretically one day require know your customer (KYC) verification and be subject to government regulation. Even worse, banks could release 2nd layer scalability solutions like Lightning Network, diverting most users away from the main chain and ruining the decentralization of the Bitcoin economy. Even worse, transactions getting diverted from the main chain can lead to insufficient mining revenue long term as block halvenings continue, causing the network hash rate to decrease, and making the Bitcoin network more centralized. If this gets extreme enough it is perhaps even possible that banks could become the majority of the hash rate, and force KYC for all Bitcoin users.

In order to prevent this outcome, it is essential for the Bitcoin community to come together and revamp the technology of Bitcoin so that it is instant and scalable. This could perhaps be accomplished by integrating a decentralized lightning network-esque option into Bitcoin’s code, and nodes could be incentivized for running this network. This would make Bitcoin scalable and instant, while simultaneously providing sufficient income for miners to maintain the decentralization of the Bitcoin network long term, as opposed to the current situation where 2nd layer scalability solutions are centralized and divert income away from miners.

We also discuss how the mantra of HODLING and in general Bitcoin being viewed as an investment is crippling Bitcoin’s circulation as a currency, and preventing the critical changes that need to be implemented for Bitcoin to truly become a currency.

Listen to a radio show/podcast about this issue here http://www.cypherpunklabs.com/bitcoin-is-in-peril-due-to-the-centralization-of-2nd-layer-scalability-solutions-and-the-hodling-mentality/

I believe this is a serious problem, and the community needs to come together and reverse this or Bitcoin will be in peril... I will do what I can to spread awareness, and really hoping a discussion gets going on this over here, so we can all solutinize and get the ball rolling...

[Kakmakr]

You are missing the whole point of 2cnd layer scalability, because it was introduced as a "add-on" option to handle micro transactions. So your heavy traffic can still run on the main lanes, but the smaller and faster traffic is directed to a fast lane <off-chain> to eleviate congestion on-chain.

When you do a small payment, you need almost instant transaction confirmations and only off-chain solutions can provide for that, but when you want to do bigger transactions, you can wait longer and you can do this on-chain. Bigger blocks will cause larger storage needs for a bloated Blockchain, so off-chain solutions helps to prevent that. 

[nutildah]

Well OP there's a thousand altcoins out there that are all trying to be better than bitcoin. Many of them are attacking the scalability problem, from every conceivable angle. You can take your pick from any of those if bitcoin isn't doing it for you.

[psycodad]

All most every altcoin has a higher onchain transaction capacity by a factor of 4X more than bitcoin.
None of them are whining the node hardware is not affordable.

Simply because most of them do not carry a meaningful amount of transactions compared to BTC, their low storage and processing requirements come from mainly empty blocks.

[BestBitcoinBuyers]

Bitcoin is 10 years old, works fine as store of value

10 years from now see how many 2nd layers and side chains have launched to make bitcoin even more valuable  

There is no problem with bitcoin as OP is suggesting because we all know about the trade offs with using bitcoin until "faster payments" are actually expected to work in less than 10 minutes.

Blocks being solved every 10 minutes means bitcoin is gaining strength and value. That is all that matters.

[CypherpunkLabs]

Fun fact that most crypto people are missing, Lightning Labs, the company which created and owns the Lightning Network, is a centralized entity. This means there is no guarantee they will allow anonymous transactions long term. It would be the ultimate disaster if most users are on the Lightning Network in the future and then they go KYC. This is the risk present with most or all current 2nd layer scalability solutions.

https://lightning.engineering/team.html

[buwaytress]

Fun fact that most crypto people are missing, Lightning Labs, the company which created and owns the Lightning Network, is a centralized entity.

Fun fact that Lightning is an open source protocol that is not owned by anyone, certainly not Lightning Labs.

What Labs did develop (but even then I believe is open source) is a client, a way to implement Lightning. Even IF they really did force KYC for it, you are free to use the code to do your own implementation however you want or like.

[CypherpunkLabs]

You say it in your own post, they control the client. If they did KYC only a small amount of users would stop using it, most would go along with it like they do with crypto exchanges.

[squatter]

I believe this is a serious problem, and the community needs to come together and reverse this or Bitcoin will be in peril... I will do what I can to spread awareness, and really hoping a discussion gets going on this over here, so we can all solutinize and get the ball rolling...

There's plenty of altcoin communities peddling this message. Maybe you should check some of them out. There's literally thousands and thousands of them. Have a blast.

People who are serious about the security of their money hold bitcoins. The market has made that abundantly clear.

[Wind_FURY]

Off-chain scalability solutions keep the mainchain pristine, and pure. In fact, there are already "off-chain layers" in Bitcoin through exchanges. All Bitcoins you deposit to an exchange is listed in their ledger, while your real coins are in, hopefully, stored in a cold wallet.

In a large scale, if Bitcoin is under the custody of centralized services, then the possbility of censorship by the custodians might make it "in peril".

But if the OP is saying "Bitcoin is in danger because of "off-chain layers" like Lightning, then this is simply untrue. The possiblity of hubs forming in Lightning for better efficiency is expected, but by design, nothing prevents any user to be a hub, and you also have the ability to overcome hubs by opening a channel directly to any peer-node.

[fiulpro]

Bitcoin is in dire need of a scalability solution, since its 10 minute confirmation times and 1 MB block size makes it incapable of handling even a small fraction of global retail transactions, with the ultimate result being that Bitcoin is barely used as a real-life currency and is instead intimately linked to fiat. In an attempt to fix this, 2nd layer scalability solutions like the Lightning Network and Liquid have been developed, but these are centralized and could theoretically one day require know your customer (KYC) verification and be subject to government regulation. Even worse, banks could release 2nd layer scalability solutions like Lightning Network, diverting most users away from the main chain and ruining the decentralization of the Bitcoin economy. Even worse, transactions getting diverted from the main chain can lead to insufficient mining revenue long term as block halvenings continue, causing the network hash rate to decrease, and making the Bitcoin network more centralized. If this gets extreme enough it is perhaps even possible that banks could become the majority of the hash rate, and force KYC for all Bitcoin users.

In order to prevent this outcome, it is essential for the Bitcoin community to come together and revamp the technology of Bitcoin so that it is instant and scalable. This could perhaps be accomplished by integrating a decentralized lightning network-esque option into Bitcoin’s code, and nodes could be incentivized for running this network. This would make Bitcoin scalable and instant, while simultaneously providing sufficient income for miners to maintain the decentralization of the Bitcoin network long term, as opposed to the current situation where 2nd layer scalability solutions are centralized and divert income away from miners.

We also discuss how the mantra of HODLING and in general Bitcoin being viewed as an investment is crippling Bitcoin’s circulation as a currency, and preventing the critical changes that need to be implemented for Bitcoin to truly become a currency.

Listen to a radio show/podcast about this issue here http://www.cypherpunklabs.com/bitcoin-is-in-peril-due-to-the-centralization-of-2nd-layer-scalability-solutions-and-the-hodling-mentality/

I believe this is a serious problem, and the community needs to come together and reverse this or Bitcoin will be in peril... I will do what I can to spread awareness, and really hoping a discussion gets going on this over here, so we can all solutinize and get the ball rolling...

But it is already handling all global transactions, also centralization on th second tier would only mean increased fee , do you even know how bad it would be for the community ?
Also I don't think it actually fits in the currency section , since more or so people see it as in Investment , we already have 180 recognized currencies worldwide and the fact that Bitcoin could easily be converted into any of them within some time is good enough for everyone .
I think it would just like making it like any other government firm .

[Herbert2020]

just because you don't understand the protocol, how nodes operate both on bitcoin network and second layer networks and how open source software and protocols work it doesn't mean that protocol is centralized. it only means you have been lazy in educating yourself.