You (and everyone else quoting low transactions per second figures) seem to be ignoring the parts above BTC that just use it as a net settlement layer, but allow for large numbers of transactions for almost no marginal energy usage per transaction. Lightning wouldn’t be able to do all those transactions without BTC providing that security.
There’s a lot to disagree with here. I don’t want to argue it all, but regarding Bitcoin efficiency, the Lightning network directly resolves this issue. It’s more efficient and cheap than current payment networks like Visa, but still has the same security and permissionless guarantees as the base chain. Not to mention it adds major improvements regarding privacy.
This uses the lightning network. The energy cost of a lightning payment is orders of magnitude lower than bitcoin.
This kind of usage actually demonstrates bitcoin's valuable use case (a base layer for final settlement) whereas in recent years a lot of energy was being burned effectively just for speculation.
The Lightning network solves the wrong problem. The whole idea behind the lightning network is to reduce the growth of the blockchain. The blockchain growing is not going to be a factor that effects the operation of the network.
Instead I'd rather see people try to fix the problem of it being expensive to spend bitcoin sourced from many small inputs. This is a problem that the lightning network does not address.
So if the lightning network does get build, we'll all be able to use microtransaction channels which will slow the growth of the blockchain, but will still cost $20 in fees to send $100 worth of bitcoin sent in tiny UTXOs.
So by your metric the global banking industry, which uses several orders of magnitude more electricity than the bitcoin network, also isn't sustainable.
A single bitcoin may be pricey, but fortunately there are eight decimal places after that first coin, enabling users to spend however much or however little they want.
You're right about the lightning network, it stands to revolutionize the bitcoin network by providing an instantaneous zero-confirmation payment layer on top of the bitcoin blockchain. Critically, though, it wouldn't work at all without the security provided by all that "wasted" electricity. Think of the lightning network like the HTTP protocol layer resting on top of the TCP/IP communication layer. HTTP wouldn't work without TCP/IP and TCP/IP wouldn't be nearly as useful without the myriad of protocol layers which it enables. This is still early times for bitcoin, and you ain't seen nothin' yet.
Yes I 100% agree Lightning Network solves a lot of the medium of exchange issues and in a really cool way too.
I don't see the volatility stopping though. And being volatile upwards might be good for the spender who's been saving that money long term, but probably not for the seller who needs to count on that revenue to cover its monthly expenses.
Lightning appears to add more problems than solutions. It has a whole bunch of critical issues. Here is a short list.
1. You need to have a computer constantly online or your counter party can easily steal all your money. This leaves you vulnerable to all sorts of attacks.
2. The lightning network works by routing payments through a network to your destination. The issue here is that the routing for the lightning network is extremely complicated and is currently an unsolved (and probably unsolvable) problem. The core issue is that you have to route money though a network where channel capacities are changing with each and every transaction. Imagine trying to route internet packets if the size of the links changed thousands of times per second.
3. It's relatively expensive to create and destroy channels at about two transactions per channel. Lightning proponents claim that this will be rare, but that can only be the case if there is minimal net flow of money. This is trivially not the case because users will be sending bitcoin more than they recieve and the reverse for retailers.
4. Lightning has huge capital costs. You need to lock up large amounts of bitcoin in these channels for significant amounts of time. There is a real cost for this in terms of the lost interest. Channels are certainly not anywhere close to free.
>The development of the Lightning Network may have consequences for welfare. First, as Bitcoin becomes a more efficient payments system, users are better off. Their transactions settle more quickly and more cheaply (Zimmerman (2020)). Second, since fewer transactions need to be recorded on the blockchain, less memory and energy are needed to run a Bitcoin node. This saving lowers the cost of maintaining the blockchain, allowing more nodes to participate and making the system more secure against a double-spending attack (Budish (2018)). Third, by reducing fees, the LN reduces the incentive for Bitcoin miners to use large amounts of computing power, meaning less energy use and positive consequences for the environment.5 Fourth, less blockchain congestion may mean lower barriers to arbitrage across cryptocurrency exchanges, thereby improving market liquidity (see Hautsch, Scheuch, and Voigt (2018)).
>While this paper focuses on Bitcoin, the same technology can allow other cryptocurrencies to be widely used, secure, and decentralized. For example, the Raiden Network is a similar netting solution for Ethereum. Other solutions to the scalability problem have been proposed, including sharding, and batching at exchange level.6 If the scalability problem can be successfully addressed, it may be possible for a currency based on a permissionless blockchain to obtain wide acceptance.
very cool to see this coming from the Federal Reserve Bank of Cleveland
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