Exploring the Centralization Risks of Bitcoin’s Lightning Network

For the vast majority of Bitcoin Core factors, the Lightning Network is considered as the very best option for scaling Bitcoin to lots of millions of brand-new users. However the system has not yet been carried out on the Bitcoin blockchain, which has actually left numerous to question whether it is smart to put a lot hope and dependence behind an untested solution.At a current event at the Coinbase offices in San Francisco, Lightning Network developers Joseph Poon and Tadge Dryja offered a discussion on their design for scaling Bitcoin via a generalized network for payment channels. Throughout their talk, Dryja and Poon reacted to concerns from the audience about how the Lightning Network may ultimately end up being somewhat centralized via so-called supernodes.Some Nodes Will Be Better-Connected Than Others Coinbase co-founder Fred Ehrsam raised the concern of supernodes throughout the Lightning Network presentation, and Poon reacted to this concern, specifying: “I think there will be [some nodes] more-connected than others. It is essential to make the nodes

non-identifiable and easily interchangeable. When it pertains to highly-connected nodes, it’s not definitely inexpensive. It’s not going to be supernodes just like BitTorrent or Skype peers(the way Skype worked 5 or 10 years ago ), simply due to the fact that there are costs included.” The main expense Poon was describing here was “securing”Bitcoin for the purposes of routing payments. On the customer side, Dryja and Poon have actually kept in mind that locking

up money is a little bit of a misnomer since users can still spend that money on the Lightning Network. Having stated that, there is a time-value element for those who wish making cash via payment routing.Although lots of Bitcoin holders are hoping to make a return on their holdings by means of the Lightning Network, Dryja and Poon have also discussed that the network might not be the gold rush that some were expecting. The duo thinks charges on the network will be virtually zero.Poon: There’s No Benefit for Supernodes The primary factor Poon is not too concerned about the prospective presence of well-connected nodes is that there isn’t much of a financial reward to produce those supernodes. He described,” It’s not that it’s not possible.

It’s just, exactly what do you get out of it?”Poon expounded on this point: “If you have unlimited cash and desire to link to everybody, then yeah, that can happen, however there’s no genuine advantage for you, as a node, to do that. That’s why I’m actually not that worried about a node geography that’s centralizing because there’s no network effect that benefits you. Since they’re

reasonably interchangeable, so if you start extracting a fair quantity of lease on it, they’ll just go with somebody else. “Poon did mention that well-connected nodes on the network will likely be utilized for smaller sized micropayments. This is due to the lower in advance capital costs related to routing payments valued at around a cent to those that are for something like a cup of coffee.Dryja added that there might be advantages for direct payment channels between two counterparties, but there will not

be much distinction in between payments that use 2 versus three or 4 hops.Further Analysis from BitGo’s Jameson Lopp One individual who has been believing and writing about the technical obstacles of the Lightning Network rather a bit lately is BitGo engineer and Statoshi.info

creator Jameson Lopp. Bitcoin Magazine connected to Lopp for his perspective on Poon’s remarks. In regard to the rewards( or lack thereof)to run a supernode, Lopp specified:”If you assume that routing charges are favorable(since they can be unfavorable in certain circumstances

)then there is an incentive to run an extremely connected routing node in order to draw out more charges. On the other hand, there is a disincentive to run a popular routing node since it needskeeping the personal secrets ‘exposed’on a running device that is connected to the Web, which is fairly dangerous.”Lopp added,”It continues to be to be seen where the equilibrium will settle between these opposing characteristics.”Lopp also kept in mind that fears associated with the Lightning Network have to be based upon more than just centralization, as it’s more about the risks connected with a specific kind of centralization that might be problematic. He noted,”The issue with any centralization argument is that you initially require to explain the possible results you

‘re fearing. “Lopp went on to explain that the potentially centralized aspect of the Lightning Network that worries him is the topological centralization of the node network since it would make the network more fragile and prone to collapse under demanding situations.Lopp described that a couple of entities routing the bulk of the payments on the network may not be as much of an issue if those entities are running many nodes. However, he continued: “There would still be a concern that those few entities might decide to shut off all of their nodes, creating chaos until such time as Lightning Network users might re-establish brand-new channels and ‘recover’the network via on-chain transactions.” Lopp likewise noted possible censorship and privacy concerns associated with centralization

amongst a small number of entities:”Centralization amongst a little number of entities would likewise position privacy and censorship issues, making it more difficult to path around uncooperative entities or those known to gather information for the functions of deanonymization. “Blockstream’s Rusty Russell, who is working on his own execution of the Lightning Network, has noted his belief that the layer-2 protocol will likely include a Tor-esque arms race in between those who wish to protect

personal privacy and those who want to eliminate it. Russell and other Lightning Network developers are likewise dealing with Tor-style onion routing for the network.Lopp told Bitcoin Magazine that a number of the worries about the Lightning Network can just manifest in conjunction with mempool backlogs, which would make it tough to re-establish a channel on the Lightning Network.Coinbase Is Worried About Centralization Threats Representatives from Coinbase were rather interested in the potential centralization threats related to the Lightning Network throughout Dryja and Poon’s discussion. The Lightning Network developers were extremely pleased of this acknowledgement of the importance of decentralization from the Bitcoin exchange.At least one Coinbase representative discussed that the business is not

necessarily planning to earn money off the Lightning Network. For now, it simply views it as a method to improve the products and services it already offers its users.The post Exploring the Centralization Risks of Bitcoin’s Lightning Network appearedfirst on Bitcoin Magazine.

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