Why is Lightning Bitcoin a good choice?

Responding to recent FAQs about LBTC network.

Recently, the LBTC community member @ScamResolver published on Reddit his opinion about Lightning Bitcoin. We highly appreciate the work he has made digging through the network in search for answers to his questions. Here is the response to the post.

Inactive addresses

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Lightning Bitcoin team took coins from inactive addresses which altogether accounts for around 12% (2700000 coins) of the total number of coins. Coins from inactive addresses are reserved and in case the owner of the address would decide to activate the address on lightning bitcoin blockchain, coins will be credited immediately after the input of a private key.
What do we use these coins for? Coins are used to establish network ecosystem and legal framework, part of coins were allocated to partners listed on LBTC.io website that is responsible for promoting and developing the network, as well as another part is allocated to community reward system. We have already completed two rewarding sessions: for light wallet testing, early awards for community contributors. ->

[LBTC Rewards] List of Lightning Bitcoin Community Early Awards!

It is also important to outline, that we have never tried to hide or interpret this fact differently, as well as that 12 % of taken coins are reinvested into network development, which everybody can observe. Just to remind: we have relaunched and added new features to our consensus tackling with nodes desynchronization caused by UTXO; LBTC has been listed with available deposit and withdrawal options on 6 crypto exchanges, 2 more are coming these days and even more are on negotiation status right now; LBTC is supported by 5 mobile crypto wallets so far; the network expanded to 602 registered delegates that keep bookkeeping on high speed of 3sec per block (have you already tried it?). An even bigger plan is made for the future including Lightning Node elections, smart contracts, and DApps — for all of these we have taken 12% of coins.

DigiFinex exchange [former Shuzibi]

Digifinex was the first exchange that opened deposit and withdrawal for Lightning Bitcoin. We initiated several transactions to DigiFinex exchange of buying and selling LBTC to provide the liquidity on the market in short-term until users get in. This practice is common for financial markets and called market making.

The main objective of a market making is to provide liquidity for investors and traders. Where liquidity describes the degree to which an asset or security (cryptos in our case) can be quickly bought or sold in the market without affecting the asset’s price. Here’s a simple description taken from investopedia.com about a market maker’s function:

“Market making enables the smooth flow of financial markets. Without this, investors and traders would not be able to buy and sell as easily. Less transactions in a market naturally translates to less investing, overall. Investing less would reduce funds available to companies and tend to decrease prices of shares of smaller companies without as wide a base of investors.”

In our case with Digifinex and Lightning Bitcoin, providing sufficient volume of coins on the exchange with low liquidity was an important step for keeping users satisfied by minimizing the risk they take by investing into Lightning Bitcoin.
What risk of low liquidity are we talking about? Low liquidity is accompanied by a high level of volatility, while high liquidity, price fluctuations are on the contrary less. Levels of liquidity indicate the degree of influence of buying or selling an asset on its value.

Here is a simple example:
- Let’s say your favorite Lighting Bitcoin [LBTC] drops in price 20% and you judge this to be the ideal price to get into the trade. If you have 10 ETH to invest, and there is no volume on the exchange that you are trying to buy the coin at, you will basically eat through half the order book before buying your 10 ETH worth of LBTC. So, you would single-handedly affect the price of the entire coin and, you won’t be able to get in at the price you wanted. Worst of all, before you are done buying in, other traders will try to dump their coins on you since you are the only user providing some sort of liquidity.
- With the liquidity (or market making), the user will be able to buy all 10 ETH worth of LBTC coins without affecting greatly the price because the market is provided with a sufficient volume of the liquidity for it. That is it.

Decentralization

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Lightning Bitcoin Delegate list is constantly updating and changing. Before Cobo nodes broke through to the very top, delegate list was dominated by other delegates. [Like lbtc ceo pool or lbtc-pool] We admit that current state of bookkeeping structure is far from the pure idea of decentralization. Upcoming Lightning Node elections with coins lockup and network expansion will solve this problem naturally. Applying the law of the free market, competition will become more complex, and it will not be enough to incentivize voters just with paybacks.
Anyway, community construction is a step by step process. We hope that later as soon as the network become self-sustainable, we can slowly withdraw the role of the “team”, and let the community autonomy thrive. However, it takes time.

Segwit

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The reason why Lightning Bitcoin does not support Segwit is not because it is a good way to avoid competition, instead by cutting out segwit we actually put potential users of the network outside what’s making the expansion of user base more complicated; also that does not help us to manipulate the price by limiting circulation supply. The team that is standing behind the Lightning Bitcoin project is far more confident in the concept and idea of it.
Lighting Bitcoin does not support Segwit because we do not support centralization. One of the obvious drawbacks of SegWit is a vast centralization of validating nodes, centralization in the way of centralized development.
Lightning Bitcoin has been insisting on decentralization from the first day and on, this is our principle. That is what committee system and supernode election going to solve in Lightning Bitcoin network.

Hope we answered all the questions, if one finds it not sufficient, please do not hesitate to speak out and we will keep the conversation going until mutual agreement.