The Lightning network should solve the slow transactions and high fees of Bitcoin, but so far it has caused as many problems as it has solved. Fortunately, there is another cryptocurrency waiting to recover the game.
The idea of using Litecoin as simple onramp to Lightning is not new. As Charlie Lee tweeted at the start of this summer:
Litecoin will also be the simplest onramp on the Lightning network. Does BTC take too much time and cost? No problem. Open an LTC chain payment channel in an economic and fast way, then atomically exchange for BTC if / when it is needed. This can be done in one step using submarine swaps! 😮
– Charlie Lee [LTC⚡] (@SatoshiLite) 11 July 2018
The idea of Litecoin as "silver for the" Bitcoin gold "fell out of favor when Lee's estimate decreased. But for a number of reasons, not only Litecoin is a likely competitor, it could be the only way to adopt Lightning.
Lightning Still Throws Sparks
Before you get under the bonnet, remember how the engine works. The Lightning Network is the solution to slow blocks and high fees of Bitcoins, which make everyday shopping impractical. While some cryptographers have explored other scaling solutions the Lightning network is an exchange of instantaneous IOUs, peer-to-peer, which makes it reasonable to use Bitcoin to buy a sandwich.
Although the Crypto Briefing has made the problems of Lightning Network, routing problems and bugs more amusing, these are the problems that ingenious developers can eventually solve.
But there are some problems that can not be solved because they are inherent in the design of Lightning Network. One is that there is no way to totally escape transaction fees: although Lightning transactions are extremely cheap, you still have to pay a normal Bitcoin fare to open and close your channels.
With a calculation, it takes sixteen transactions before Lightning is cheaper than Bitcoin Cash, with comparable figures for other altcoins. This is a lot of sandwiches.
The second problem is that Lightning channels are not safe and therefore unsuitable for large volumes. In order not to be accused of exaggeration, here it is in the words of Andreas Antonopoulos, one of the most respected supporters of Lightning:
There is a risk to safety. That system will have the keys on it, so it's a hot wallet. And if you're using that hot wallet with lots of bitcoins, then it's a target for the attack, and someone can hack your knot and use it to drain your wallet.
So the result is something like a Rewards card. You could put a few dollars in a Starbucks card to save some percentage on coffee. But you would not put more than ten or twenty, in case you lose the card; and you would be crazy to put more than a hundred.
At the time of writing, the average Lightning channel had a capacity of about $ 59.
But it takes sixteen cans to get your money's worth, and you can & # 39; t recharge while you go. While some maximalists might relish the shudder of Lightning for Bitcoin, many of us have enough problems in using an encrypted portfolio
Transactions large and small, but not average
The result is that Lightning is a brilliant solution, but for the wrong problem.
At present, Bitcoin is a good way to make a hundred-dollar transaction, and through the Lightning network it can also direct a hundred different one-dollar transactions. But it is not a great solution for medium-sized or infrequent transactions, except for true believers.
Which is where Litecoin comes into play.
Since the Lightning network was launched in mid-March, the Bitcoin tariffs have averaged around a dollar, although they have fallen with falling prices. The red line that embraces the X-Axis is the average fare for Litecoin, which has never exceeded 0.21 cents.
This is a world of difference, especially for occasional users referred to by mass adoption. No rational actor will spend a dollar to open / close a Lightning channel, unless they are very frequent users . A Lightning channel with Litecoin, on the other hand, could be financed with ten or even five dollars and costs less than what you would leave in the jar.
The result is a currency that fills all the holes in the crypto-economy: not only for macros and micro-transactions, but also for daily expenses. In crypts as well as in real life, silver, not gold, is the best conductor of electricity.
The author is not invested in Litecoin, but owns Bitcoin and Bitcoin Cash.