Bitcoin Scalability, Why Top Crypto exchanges Have not Integrated LN Network

[Wiwo]

As the cryptocurrency community keeps expanding and the entire cryptocurrency ecosystem is growing a lot of development has been focused on the need to make Bitcoin usage easy and faster haven't witnessed Bitcoin network congestion in the past which always result in I in high transactions fees in the bitcoin blockchain and transactions taking longer time to get confirmed, so there was a need for the development of the Bitcoin lightning network (LN).
The entire Bitcoin community welcomed this development to ease the users of low fees and faster transaction time.
But the surprise of many Bitcoin analysts quite a good number of the world-leading cryptocurrency exchange have failed to integrate the bitcoin lightning network into the exchange networks, what seem to be the reasons is unknown and those exchanges have not made any public announcement or comments as regards such refusal to integrate a utility service such as LN into the exchanges.
What can be the reason behind this exchange's actions not to integrate the Bitcoin lightning network into the services?

[Coyster]

Actually i don't think anyone can state categorically what the reason is, only the top exchanges that are yet to integrate it can give the exact reason why, but they seem to be mute on the whole issue. I was reading something about it, you can find it in this link: https://www.fxstreet.com/cryptocurrencies/news/binance-and-coinbase-silent-on-bitcoin-lightning-community-tries-to-understand-why-202204150845 . I would also be sharing excerpts too.

One Redditor suggested that the Lightning Network availability would be essentially associated with fewer incentives to keep Bitcoin on exchanges like Binance due to expensive withdrawals.

Could the above excerpt make sense? Could Binance actually be shunning the integration so users of their website would not be tempted to move all of their funds out, since they would be able to do it at a cheaper rate.

The Lightning enthusiast also doesn’t expect other exchanges like Coinbase to integrate Lightning support in the near future “since the priority seems to be to integrate as many altcoins as possible and follow the trends of the market,”

From the above could this exchanges be more concerned about the ongoing trend/hype than actually integrating the LN in their system, many of this reasons actually makes sense, and there are many more in the link above, just like the OP, i would also like to know what the community thinks about it, of course after going through the link i sent.

[Cookdata]

......

Have you ever withdraw bitcoin from a centralized exchange? If yes, then you know the answer already.
Centralized exchanges are business opened group of people, you want them to stop having access to your flat rate of 0.0005btc charges they collect from withdrawals, their generated revenue will be reduced, you don't want it, don't you? 

Centralized exchanges are known for milking users, the idea of lightening will remain untapped by this guys. Common Bech32 address that has been used by many wallets has not been implemented by this them talk more of LN. It's a fee killer and bad idea for them.

[minairia3]

......

Have you ever withdraw bitcoin from a centralized exchange? If yes, then you know the answer already.
Centralized exchanges are business opened group of people, you want them to stop having access to your flat rate of 0.0005btc charges they collect from withdrawals, their generated revenue will be reduced, you don't want it, don't you? 

Centralized exchanges are known for milking users, the idea of lightening will remain untapped by this guys. Common Bech32 address that has been used by many wallets has not been implemented by this them talk more of LN. It's a fee killer and bad idea for them.

If they integrate the Lightning network on their server then people can withdraw their Coins around free of cost.

Centralized exchanges cannot leave their users like this, it goes against their business policy. They deduct these fees to provide better and more secure services.

I think the fee deducted from the exchange is negligible, we can't expect good service in the future if we refuse to pay them.

Those who want to use Lightning can use Bitfinex or Kraken, some exchanges have LN integrated and no more hassle.

[Kakmakr]

Exchanges are not influenced by slow transactions and high fees, because most of their transactions are done within their local database and when you withdraw coins from the exchange, they add a little extra fees on top of the actual fees.. to make more profit. 

Also, not a lot of people are converting to the Lightning Network due to it's complexity and Bitcoin (SegWit) is fast enough for most people. Exchanges wants to make profit and the Lightning Network are not a money spinner. (I also think they are not too sold on the security and stability) 

[o_e_l_e_o]

It's all about the money. Let's take Binance as an example.

Binance charge a completely ridiculous 50,000 sats per withdrawal for bitcoin. In reality, thanks to transaction batching, each output from a Binance withdrawal transaction only has to pay for around 45 vbytes of the transaction size, and so they could charge less than 1% of what they charge and still process your withdrawal with a high enough fee to get in to the next block 99% of the time. So what happens to the other 49,500 sats? Straight in to Binance's pocket.

If you don't fancy being massively ripped off, then your other option is trade your bitcoin for a fake bitcoin token built on one of their centralized scamchains and withdrawal that instead. It is cheaper (even although it should be free since Binance own and operate these chains and therefore transactions on them are completely free for Binance), but again it gives them some of your money in pure profiteering and also this time locks you in to their ecosystem, guaranteeing you'll have to come back in the future and spend more of your money to (hopefully!) swap your fake bitcoin token back in to real bitcoin.

If they implement Lightning, then suddenly people can withdraw their coins without having to pay ridiculous fees and without getting locked in to their centralized scamchains. It's a lose/lose for Binance, when there are so many oblivious users who are happy to keep throwing their money away instead.

[franky1]

If they implement Lightning, then suddenly people can withdraw their coins without having to pay ridiculous fees and without getting locked in to their centralized scamchains.

HA.. for months now oeleo has been saying how he likes bitcoins tx fee's because he doesnt like bitcoin being used by the masses and prefers people to LOCK up their funds and use an alternative network..

funny part is oeleo fails to be risk adverse and actually highlight the flaws in his favourite altnet. such as the liquidity problem of bottlenecking routes that end up failing payments
something he really should learn if he wants to dream about large corporations getting millions a day in deposits..
.. yep LN just cant cope/work with large corporations. even if those large corporations indirectly paid devs to create bridges to these altnets..
coinbase is owned by the same guy that paid millions to core developers to create the gateway tx format that allowed LN locks.. but funnily enough they dont want LN

the same guy has his own investment scheme but he wont sell shares of his investment in LN millisats.

yep its funny how these corporations that financed LN(indirectly) and financed the gateway tx format that allows bridging to LN(more directly)..  are sending messages down to their minions to try to ply users over to altnets.. and stop using bitcoin. yet those at the top writing the original copies of the now well known sales pitch scripts of altnets.. yes the top of the hierarchy do not themselves want to actually integrate with it
they like the new TX format somewhat. because it allows them to make their own sidechains (binance chain and liquid) but their approval of LN is lacking, due to the real flaws and limitations of LN

heck even the main core dev that rewrote a heck of alot of bitcoin core code to introduce the gateway transaction format that allows LN bridges is still advertising his legacy address on his website. even he has not transitioned enough to trust his donations being put on his own creation

history lesson:
when bankers told their cashier underlings to get customers to stop handling gold and instead play with paper money.. yet the chief bankers stuck with hoarding gold.. you could tell that the paper money was no good in the long run even if the sales pitch offered niche usage that gold was less useful for day to day.

but hey if you cant learn from the past.. you will keep making the same mistakes

oh.. and here is the thing
LN only works if there is liquidity in the locks.
imagine 10 customers want to send 0.1btc to coinbase
coinbase would need to have a channel partner with 1btc to fulfil those 'payments'
now imagine coinbase has um.. 100 customers.. then imagine 1,000.. 10,000, 100,000
.. well coinbase has millions..
do you now see the problem of scale .. yep LN wont work to coinbases scale

LN is not like bitcoin where  in bitcoin you can freely direct deposit to anyone for any amount. in LN you are limited by the partners in a route and mainly the partners at the end of the route being available and also funded enough in the coinbase partner lock to be able to transition some balance to coinbases side..

there are many problems with LN in this regard. there are millions of bitcoin users in coinbases userbase but only a dozen LN users even liquid enough to be able to handle deposit amounts of even 0.1 more than once without having to close the contract and broadcast it to settle up and restart

[BlackHatCoiner]

.. well coinbase has millions..

And you're, for the millionth time, an obnoxious obtuse autistic idiot whose life's meaning is to increase the block size and slaughter Lightning developers. First off, Lightning is for micro-transactions. Micro. It means it's for small amounts. Not for 0.1 BTC.

Secondly, who the hell told you that this kind of money goes for the "long run"?

you could tell that the paper money was no good in the long run even if the sales pitch offered niche usage that gold was less useful for day to day.

[coupable]

Exchanges are not influenced by slow transactions and high fees, because most of their transactions are done within their local database and when you withdraw coins from the exchange, they add a little extra fees on top of the actual fees.. to make more profit.  

Also, not a lot of people are converting to the Lightning Network due to it's complexity and Bitcoin (SegWit) is fast enough for most people. Exchanges wants to make profit and the Lightning Network are not a money spinner. (I also think they are not too sold on the security and stability)  

But how you can explain that many exchanges support already the Lightening network? More than 20 exchanges actually support LN including Coinbase and Bitfinex and Paxful. Check full list here : https://github.com/theDavidCoen/LightningExchanges
About Segwit format, exchanges delay to support it because they have no benefit to do so until it becomes ridiculous to continue ignoring it.

[Wiwo]

More than 20 exchanges actually support LN including Coinbase and Bitfinex and Paxful. Check full list here : https://github.com/theDavidCoen/LightningExchanges
About Segwit format, exchanges delay to support it because they have no benefit to doing so until it becomes ridiculous to continue ignoring it.

No ops coinbase is not among the list of exchange that currently uses the Bitcoin Lightning network and even from the link you shared coinbase LN status is NO, I agree with you on the reason why most exchanges look away from the lightning network as it seems to be against their concept which is profit making so lightning network to them will result. into.low revenue not minding it benefits the clients who will pay cheaper feel and have less waiting time in between transactions.

[hatshepsut93]

Besides the exchanges using withdraw fees as their revenue, they also tend to not adopt or adopt very slowly any new changes to Bitcoin. It took them years to move to bech32, and some still did not. Also, according to developers Lightning is still not officially released, here's what they say in lnd's readme:

Safety

When operating a mainnet lnd node, please refer to our operational safety guidelines. It is important to note that lnd is still beta software and that ignoring these operational guidelines can lead to loss of funds.

Exchanges would rather not take risks that could cost them a lot in case of failure.

[Wiwo]

Besides the exchanges using withdraw fees as their revenue, they also tend to not adopt or adopt very slowly any new changes to Bitcoin. It took them years to move to bech32, and some still did not. Also, according to developers Lightning is still not officially released, here's what they say in lnd's readme:

Safety

When operating a mainnet and node, please refer to our operational safety guidelines. It is important to note that land is still beta software and that ignoring these operational guidelines can lead to loss of funds.

Exchanges would rather not take risks that could cost them a lot in case of failure.

Exactly I feel the exchange is operating on a professional code of guidelines and does not want to risk the set back that may come with running a new node of the payment network and since the lightening network is a new development they feel the is a need for more trust and testing it for a long period before integration that is if they ever consider that in the future. Even though the exchange makes revenue from the fees charged which lightning network will eradicate the security of funds is what stands as the major setback for the integration of LN.