My thoughts on the Lightning Network and the folly that was Blockstream & Core
So, the Lightning Network buzz is quite high this week with the recent announcement that it’s “live” on mainnet.
And I’m seeing a lot of posts about it here and on /r/btc and a lot of healthy (and some unhealthy) discussion about it.
In that context, I just wanted to share my thoughts on what the Lightning Network is and what it isn’t, and what its potential really is and where it lacks potential.
For many of us who “defected” over to BCH in recent months, the whole saga of Bitcoin BTC and the whole crazy story of what happened since 2015 has basically revolved around the Lightning Network. We are still skeptical and we have a bitter taste in our mouths and we have varying degrees of success at articulating what we don’t like about it.
To that end, I’ll take a stab at articulating how I see Lightning and at explaining what I don’t like about it and what I do like about it.
But before I do that: Here’s the actual problem that the Lightning Network solves:
It allows for trustless, blockchain-backed high-frequency microtransactions between large institutions (or at least institutions with high liquidity). It solves that problem in a minimally acceptable fashion.
That’s what the Lightning Network does. That’s the problem it solves. It’ll allow mid-to-large sized entities (entities with high liquidity — such as banks and money transmitters) to send incredibly small (or incredibly large) amounts of money around between each other incredibly quickly and cheaply.
That’s the problem it solves.
Here’s what it doesn’t do:
It doesn’t actually solve the scaling problem for the use-cases that exist today and that existed back in 2015. Even though it was sold as such (to those gullible enough to believe it).
All it does is that it simply allows entities with high liquidity to move small amounts of money quickly back and forth off-chain, with no impact on tx fees on-chain (and thus with minimal cost and risk).
Potentially even fractions of a penny can circle the globe thousands of times changing hands between dozens of money transmitters and banks for free, and trustlessly because it’s blockchain-backed. That’s not bad. It certainly has some use-cases.
Now, had Lightning popped into existence in 2015, we would have all hailed it with great fanfare and open arms and welcomed it, wouldn’t we?
Had it even popped into existence today in 2018 without the tragically destructive story behind what Core and Blockstream did to BTC — we would still have greeted it with open arms.
But that’s not what happened.
What really happened is that Core and Blockstream basically took over BTC and pushed out a lot of great, smart, competent people. They alienated large parts of the crypto ecosystem — businesses, devs, enthusiasts. They allowed adoption to stagnate and then decline. They let the BTC blockchain get so congested that people stopped using BTC and everyone fled to alts. Their lack of vision led to the creation and success of ETH.
In their enthusiasm for pushing their agenda so aggressively, they made tons of mistakes, and are still making them. They alienated businesses, crippled Bitcoin as a means of exchange, and drove people away.
Had they had a bit more self-confidence, a bit more wisdom, and a bit more patience, Blockstream could have had their cake and eaten it too.
But they made mistakes. They were rash and immature in their approach. And they will pay the cost for that (irrelevancy and bankruptcy), but they took BTC down along with them, which is what we are ALL angry about.
(They still control the currency, by and large, and are still responsible for its ongoing steady destruction, by the way — but who knows — maybe BTC will be saved before it totally implodes).
There are lessons for all of us here: Namely — how important competence is.
It’s astounding how easy it is to destroy something great if you aren’t careful. All the decisions Greg Maxwell and Blockstream/Core have made from 2015 up until the present day have been wrong and very bad for Bitcoin, and even terribly horribly bad for Blockstream.
What they should have done: They should have not been so fearful that Lightning absolutely needed a crippled Bitcoin for it to have a market and a use-case. They should have had the confidence and vision to realize there was room in this world for on-chain scaling and on-chain transactions, as well as high frequency micropayments via something like Lightning off-chain.
Their key mistake: Without on-chain activity — why would anyone care to scale off-chain? Why would anyone let themselves be under the thumb of Blockstream’s attempt to control the crypto market when anyone can easily fork off another coin that actually works?
So, they ultimately were small minds thinking small. As the scaling debates heated up, they only grew more obstinate and cult-like in their conviction that they were right and that they would never compromise.
As a result, they have driven users and businesses away (quite predictably).
I’m still quite amazed at how seemingly intelligent people can make the stupidest decisions. It astounds me how people that should have known better (given their above-average IQs) continued to make strategic error after strategic error.
So, they drove away the likes of Andresen and Hearn, and kept in their inner-circle a group of like-minded (and small-minded) fools that couldn’t see the forest for the trees and that continued to steer the ship in the completely wrong direction. All the while drinking the kool-aid (and “champaign”) and feeling content with themselves at their accomplishments
That’s what Blockstream and Core did. They destroyed Bitcoin. Against their own best interests, even!
So that’s why we don’t like the Lightning network. Because of the history and how it was shoe-horned in as the only scaling solution. We don’t like how some bad people used its promise to make stupid decisions that basically led to the destruction of Bitcoin BTC.
That’s the bad taste in our mouths.
But — Lightning itself isn’t bad — and likely it may even end up having some quite lucrative use-cases. But for that to happen, FIRST there needs to be tons of on-chain traffic. Otherwise — why bother?
It’s just tragic what happened to Bitcoin BTC in the name of the Lightning Network.
So that’s why we are a little bitter. Because.. well fuck Blockstream and fuck what they did to Bitcoin BTC.