LIGHTNING NETWORK — THE CHALLENGES AHEAD
Lightning network has been termed as the solution to the Bitcoin’s scaling issues by encouraging a large number of merchants to accept Bitcoin as instant micro-payments. It was initially described by Joseph Poon and Thaddeus Dryja in this whitepaper dated to 2015, but it’s only coming to real action now after a long awaited time. The specification was announced after the paper, and is being developed by multiple parties, including MIT Digital Currency Initiative, Elements Project (c-lightning), Lightning Labs (lnd), and ACINQ (eclair).
Depending on who you ask, Lightning network is either the cure to scaling & a way to consolidate Bitcoin as the dominant cryptocurrency or a recipe for disaster with severe security and usability pitfalls. As always the truth falls somewhere in the middle and some aspects of Lightning network are far more nuanced that what is readily apparent.
In this article, we will highlight the existing challenges that Lightning Network is facing, which are more important to know before going to learn about the advantages.
Challenges that Lightning network face : Centralized hubs & Routing
— Centalization issue
Centralization is a serious concern for LN Channels. Since there are economic penalties imposed for being offline, this will inevitably lead to nodes being hosted on centralized services offering high uptime like Amazon AWS, Azure etc. This would ultimately create a single point of failure and a prime target for government regulation or interference. The current network topology is already heavily reliant on Lightning Hubs providing nodes with high uptime and acting as communication centers aggregating many channels with different users, enabling the exchange of funds between users not directly connected to each other. Hubs with all of those connections mean Lightning network is relatively centralized.
Also, there is a possibility that the novelty can lead to a drastic increase in the centralization of the network and the actual introduction of KYC banking rules, leading to deanonimization of users. It will eventually result in large hubs belonging to the same centralised banks with which the decentralized platform is struggling.
— Routing Challenge
Loading a LN node is a long process, and for those who are not very familiar with technology, it is also incredibly complex. Here you can add the lack of an alternative: the use of simple client wallets, such as Eclair, is not suitable due to connectivity problems. Using these applications, users always lose access to their channels, which are constantly opened and closed.
LN users using the lnd client will encounter problems on the Satoshi’s Place (SP) site. The SP portal uses c-lightning, and there are problems with incompatible payments. Lighting nodes have difficulty finding routes.
It’s recommended to connect to more centralized nodes, such as Yalls or Acinq, to avoid routing problems. However, even when following the advice of the channel, it will often close — in 10–15 minutes, and sometimes immediately.
In case of a LN payment of small amounts of few dollars, it’s quite easier to find a successful payment route but for larger amount of payments it is difficult to find a routing between the various nodes available because not all nodes have channels with a capacity equal to the larger amounts used.
The problem with broadcasting any transactions in the LN to create a network map, is that it scales worse than bitcoin. With bitcoin, data only needs to be sent between the full nodes. For LN, everyone is a node and everyone needs data to find routes. So even if you only send an opening transaction to the whole LN, when the LN is 100 million users, that’s 100 million messages that need to be sent vs. ~5000 for an on chain bitcoin transaction. Sure, you get extremely low data transactions after that, but you’ll never recover your initial data investment.
The current solutions for routing in the Lightning Network are less efficient in its data usage than bitcoin. Meanwhile, the only problem that LN was trying to solve was decreasing hardware and bandwidth requirements for bitcoin transactions. Undoubtedly, Lightning network aims to revolutionise the cryptocurrency space incorporating innovations but will it able to perform upto the expectations or will it remain a hype only, given existing challenges are yet to be mitigated. It seems obvious, that Lightning Network payment requests would soon be extended to allow payments to be split over multiple routes to mitigate the capacity limitations. But how soon ? Time will only tell !
