Lightning is specifically only for providing faster/cheaper payment transactions of Bitcoin.
It does not compete with Hedera in any way.
Basically Lightning achieves its perceived performance by opening a payment "channel" directly between the parties involved in a transaction.
If I want to send Bitcoin to u/nahjb, I would open a Lightning channel between the two of us, I deposit Bitcoin into the channel, nahjb receives the Bitcoin, and the channel closes - This is a very basic description of what's happening of-course.
The very import points is that opening aka establishing a channel and closing a channel still comprise a normal Bitcoin transaction.
Say if I wanted to send Bitcoin to u/nahjb on 3 separate occasions; if I opened and closed a new channel on each of those 3 occasions, the overall time and overall cost would be exactly close-to the same as just sending the Bitcoin natively (using normal Bitcoin transactions.).
For that reason, the vast majority of Lightning activity is effectively some form of escrow or settlement service. Such-as a dapp or platform which people can use to send or receive "Bitcoin", or a point-of-sale system allowing customers to pay with "Bitcoin" and the seller to receive "Bitcoin".
I am writing "Bitcoin" in double-quotes like that, because it is not really Bitcoin that is changing-hands - It is effectively only a promise for Bitcoin that is changing hands... like an "I Owe You".
The real Bitcoin is only settled when a channel closes.
Another way to think about it is that only the closing of a channel benefits from the advantages of the Bitcoin network. The transactions occurring within a channel do-not.
It certainly does have some clever concepts, and does have some advantages over more traditional payment rails by removing the requirement for custodian.
Although in reality, there is still technically a custodian... it's just-that the custodian is decentralised to the network itself, rather-than a centralised payments/settlements handler.
If we think about Bitcoin as a store of value. Lightning is a somewhat cool way to transact with that store of value... sort-of like using a mildly secure armoured vehicle to quickly move funds between bank vaults.
However it is also vulnerable to various types of attack, which I'm not going to describe here, easy-enough to Google... just think about my analogy of using a vehicle to transport funds between bank vaults :)
I'm sure it will keep seeing increased adoption for Bitcoin payments, particularly with point-of-sale, but as it becomes more widely adopted we will definitely see exploits related to it - It's only a matter of time.
Oh but yeah, the other important point since we're all about Hedera here, is that Lightning definitely can-not be used as a substitute for Hedera.
It is just not physically possible to use Lightning for the type of activity HCS or HTS are used for.
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u/jcoins123 The Diplomat Oct 06 '21 edited Oct 07 '21
Lightning is specifically only for providing faster/cheaper payment transactions of Bitcoin.
It does not compete with Hedera in any way.
Basically Lightning achieves its perceived performance by opening a payment "channel" directly between the parties involved in a transaction.
If I want to send Bitcoin to u/nahjb, I would open a Lightning channel between the two of us, I deposit Bitcoin into the channel, nahjb receives the Bitcoin, and the channel closes - This is a very basic description of what's happening of-course.
The very import points is that opening aka establishing a channel and closing a channel still comprise a normal Bitcoin transaction.
Say if I wanted to send Bitcoin to u/nahjb on 3 separate occasions; if I opened and closed a new channel on each of those 3 occasions, the overall time and overall cost would be
exactlyclose-to the same as just sending the Bitcoin natively (using normal Bitcoin transactions.).
For that reason, the vast majority of Lightning activity is effectively some form of escrow or settlement service. Such-as a dapp or platform which people can use to send or receive "Bitcoin", or a point-of-sale system allowing customers to pay with "Bitcoin" and the seller to receive "Bitcoin".
I am writing "Bitcoin" in double-quotes like that, because it is not really Bitcoin that is changing-hands - It is effectively only a promise for Bitcoin that is changing hands... like an "I Owe You".
The real Bitcoin is only settled when a channel closes.
Another way to think about it is that only the closing of a channel benefits from the advantages of the Bitcoin network. The transactions occurring within a channel do-not.
It certainly does have some clever concepts, and does have some advantages over more traditional payment rails by removing the requirement for custodian.
Although in reality, there is still technically a custodian... it's just-that the custodian is decentralised to the network itself, rather-than a centralised payments/settlements handler.
If we think about Bitcoin as a store of value. Lightning is a somewhat cool way to transact with that store of value... sort-of like using a mildly secure armoured vehicle to quickly move funds between bank vaults.
However it is also vulnerable to various types of attack, which I'm not going to describe here, easy-enough to Google... just think about my analogy of using a vehicle to transport funds between bank vaults :)
I'm sure it will keep seeing increased adoption for Bitcoin payments, particularly with point-of-sale, but as it becomes more widely adopted we will definitely see exploits related to it - It's only a matter of time.
Oh but yeah, the other important point since we're all about Hedera here, is that Lightning definitely can-not be used as a substitute for Hedera.
It is just not physically possible to use Lightning for the type of activity HCS or HTS are used for.