The problem with nano is that it makes the assumption you can just give away transaction space for free. You can’t. If you do, spammers and other low-value uses take up all the space. The more space gets taken up, the more expensive it is to run a node, and the more centralized your network becomes. So what did they do when they ran into this problem? They added a proof-of-work component. The very thing they created their coin to avoid! If you look at almost all of these non-PoW cryptos, the only reason they can get better transactions per second or low tx fees is because they are very centralized or because nobody is actually competing for that space because nobody uses them.
Bitcoin solves this scaling/fee problem with Bitcoin lightning, which is a layer on top of the main chain. The main chain provides security, while actual transactions live on the second layer. Fees on lightning measure in the pennies and confirm instantly. The scale you can take lightning to is basically infinite. That’s actually useful as a currency.
Nano has alwas has a computational part associated with transactions. It once was used to prioritize transactions. Nano has evolved to a different prioritization scheme. That computational part will be phased out.
The lightning network is a silly attempt to merge bad parts of cryptocurrencies with bad parts of traditional finance: you need the electric energy guzzling Bitcoin and middlemen just like in traditional finance - or would you care to open and close your own channels, pay watchtowers etc. or “simply” use the channels of middlemen?
And how would you have cheap transactions without those middlemen, if operating your own channels requires transactions on layer 1?
Nano has alwas has a computational part associated with transactions. It once was used to prioritize transactions. Nano has evolved to a different prioritization scheme. That computational part will be phased out.
We’ll see. It had to be “phased in” in the first place for a reason. Either you limit chain space and charge for it, or your chain grows an infinite size. There is no way around that problem.
And how would you have cheap transactions without those middlemen, if operating your own channels requires transactions on layer 1?
Because once a channel is opened, you can have essentially infinite transactions within it. So there is not a 1:1 relationship between channel opening/closing costs (layer 1) and transaction relaying costs (lightning). You need the layer 1 underneath to provide the security for the lightning transactions. Without layer 1, if somebody you are transacting with doesn’t follow the rules, you have no way to enforce the rules. Incentives are setup in such a way that it’s incredible rare you ever need to to go L1 to get that enforcement, since the deck is stacked against anybody who tries to break the rules.
If you have a custodial wallet: Literally nothing, the wallet handles everything. You don’t even need to know what a channel is.
If you have a self-custody wallet: Install it on your phone and make sure you can connect to the internet once every 5 days. You don’t have to open the wallet, some background service does everything automatically. Most wallets have built-in automatic watchtowers, so you don’t ever need to connect to the internet and somebody else watches the channel for you.
The attacks you can do in lightning are very limited. Basically the only one you can do is force close a channel and broadcast an old state on-chain. But your other party in the channel can correct you by publishing the more recent state. They have several days to do this. If you tried to cheat this way, not only do you not get the coins you wanted, but there is a penalty as well. You lose money. So nobody ever does it.
There’s about 200M USD currently locked up in lightning contracts. If you think you can hack lighting, have at it. The best hackers in the world have tried, they have all failed.
The problem with nano is that it makes the assumption you can just give away transaction space for free. You can’t. If you do, spammers and other low-value uses take up all the space. The more space gets taken up, the more expensive it is to run a node, and the more centralized your network becomes. So what did they do when they ran into this problem? They added a proof-of-work component. The very thing they created their coin to avoid! If you look at almost all of these non-PoW cryptos, the only reason they can get better transactions per second or low tx fees is because they are very centralized or because nobody is actually competing for that space because nobody uses them.
Bitcoin solves this scaling/fee problem with Bitcoin lightning, which is a layer on top of the main chain. The main chain provides security, while actual transactions live on the second layer. Fees on lightning measure in the pennies and confirm instantly. The scale you can take lightning to is basically infinite. That’s actually useful as a currency.
Nano has alwas has a computational part associated with transactions. It once was used to prioritize transactions. Nano has evolved to a different prioritization scheme. That computational part will be phased out.
The lightning network is a silly attempt to merge bad parts of cryptocurrencies with bad parts of traditional finance: you need the electric energy guzzling Bitcoin and middlemen just like in traditional finance - or would you care to open and close your own channels, pay watchtowers etc. or “simply” use the channels of middlemen?
And how would you have cheap transactions without those middlemen, if operating your own channels requires transactions on layer 1?
We’ll see. It had to be “phased in” in the first place for a reason. Either you limit chain space and charge for it, or your chain grows an infinite size. There is no way around that problem.
Because once a channel is opened, you can have essentially infinite transactions within it. So there is not a 1:1 relationship between channel opening/closing costs (layer 1) and transaction relaying costs (lightning). You need the layer 1 underneath to provide the security for the lightning transactions. Without layer 1, if somebody you are transacting with doesn’t follow the rules, you have no way to enforce the rules. Incentives are setup in such a way that it’s incredible rare you ever need to to go L1 to get that enforcement, since the deck is stacked against anybody who tries to break the rules.
I stated the reason for it being phased in: prioritizing transactions.
Tell me how to keep a channel open without risking loss of funds through flood and loot attacks.
The attacks you can do in lightning are very limited. Basically the only one you can do is force close a channel and broadcast an old state on-chain. But your other party in the channel can correct you by publishing the more recent state. They have several days to do this. If you tried to cheat this way, not only do you not get the coins you wanted, but there is a penalty as well. You lose money. So nobody ever does it.
There’s about 200M USD currently locked up in lightning contracts. If you think you can hack lighting, have at it. The best hackers in the world have tried, they have all failed.
https://bitcoinvisuals.com/ln-capacity