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Analysis

The Bitcoin Lightning Network SUCKS - Here's Why

Hayden Otto
7 min read
The Bitcoin Lightning Network SUCKS - Here's Why
In: Analysis, Bitcoin, Lightning Network, Videos
The lightning network, a vaporware technology presented by advocates of small blocks as the solution to Bitcoin’s scaling problems. It’s a well-established fact that Lightning was never going to work at scale outside of custodial wallets, which are identical to the banking institutions most cryptocurrency advocates are trying to rid themselves of. Anyone who dared to point this out was shouted down by a small, but vocal, group of self-proclaimed BTC maximalists, who insisted lightning transactions would remain decentralized and peer-to-peer. In 2017 they got their desired outcome when SegWit was pushed through, thereby laying the foundation for the Lightning Network. Bitcoin would now attempt to increase its transaction capacity through lightning rather than by increasing the block size. Proponents of lightning have been left unobstructed and unopposed for more than 5 years. So, has their scaling pipe dream materialized? Find out after a message from my sponsor. MEXC is a leading cryptocurrency exchange with all the top cryptocurrencies and a wide variety of trading pairs. It has deep liquidity for BTC and ETH perpetual contracts as well as support for OTC trading. The MEXC utility token provides several benefits to holders, such as a reduction of up to 30% on trading fees and funding fees when going long or short. To get an additional 10% discount on fees, sign up using the link in the description. I’m no stranger to Bitcoin’s Lightning Network. Going back as far as 4 years ago, I made videos about the Lightning Network where I discussed and demonstrated how poor the user experience was. My key findings back then were that it was difficult to onboard new users, there were limits in terms of the amount of BTC you could send, there were issues with payment routing which made it unreliable, and in most cases you had to trust a 3rd party with your funds which introduces the possibility of censorship and other issues associated with PayPal-like systems. All of this meant that with Lightning, the Bitcoin user experience had taken several steps backward to the point where it was no longer competitive against legacy payment systems like Visa and Mastercard. The typical response to these criticisms of lightning was that it was still under development and that we needed to give it more time. So where are things at, all these years later? Well in just the first 2 weeks of October 2022, we had Bitcoin engineer Will Ricketts tweet about how his Strike and Swan wallets were frozen after donating to an open-source software project. Ricketts opened a support ticket with Strike, to try and regain access to his funds, but after more than a week he had heard nothing from them. Strike is one of the most heavily promoted Lightning wallets and it is run by Jack Mallers, one of the top Bitcoin thought leaders. His product is of course no better than a bank and evidently, they are actively monitoring their users’ transactions. I wonder when they’ll start fining people for spreading disinformation. Next up we had a user who created a large multi-sig transaction on the Lightning Network, which caused all the Lightning Labs LND nodes to fork off from the rest of the chain. This prevented users from creating or closing lightning channels for a few hours until the bug was patched. Unsurprisingly this got practically no news coverage by the crypto media, which will tie into something I speak about later, but good work to Decrypt and Protos – the only news outlets who covered this. Finally there was a viral video, published by Eric Wall, which showed his struggle to transfer $6 of Bitcoin, via Lightning, from his old phone his new phone. When doing this he encountered long payment processing times which ultimately resulted in an error that the payment failed to route. Keep in mind that this occurred with Breeze wallet which, since it is non-custodial, many Bitcoiners consider to be the best lightning wallet available. In the end, he only managed to send about 80% of his Bitcoin balance to the new phone due to an invisible limit which is the result of the wallet not knowing the correct transaction fee in advance of the payment being made. Eric went on to say “7 years in the making. This is a piece of crap. You need to be honest with yourself.” In actuality, the conceptual design for the lightning network was first introduced in February 2013, a few months shy of 10 years ago. This is evident in the Bitcoin wiki where lightning engineer Alex Akselrod published an entry that made the case for taking payments off-chain and described micropayment channels in detail. This later became the lightning network, and after all these years of development it’s safe to say it remains a complete failure and embarrassment for Bitcoin. Given the popularity of his video, Eric taunted lightning proponent Michael Saylor by putting out a poll that questioned whether Saylor had made more than three lightning transactions in his life. Saylor responded by announcing a PR stunt where he would make three transactions to some Twitter users. Instead of writing articles about the glaring issues associated with lightning network or questioning why after all these years it has failed to deliver on its promises, so-called journalists from various crypto news websites decided to run cover for Michael Saylor and his support for lightning. One that stood out to me was on CoinTelegraph and it is the literal definition of puff piece, from the thumbnail to the content of the article itself. Let’s read some of this gushing testimony. “Michael Saylor snubs claims he doesn’t use Bitcoin Lightning Network. Saylor wanted to demonstrate just how well he can use Bitcoin’s layer-2 Lightning Network by hosting a meme competition. The executive chairman of MicroStrategy, Michael Saylor, does not like to be called out. He responded to a poll that suggested he had not used Bitcoin’s layer-2 Lightning Network more than three times”. Okay so, at this point the journalist should have probably questioned why so many people believe the most high-profile advocate of Bitcoin and Lightning, does not actually use it. Is there even any video of Michael Saylor using the lightning network? He’s not shy from the camera, regularly appearing at major conferences and on national television, so there is no reason why he couldn’t film himself making lightning transactions. Personally, I’ve probably uploaded hundreds of videos of me making payments with cryptocurrency over the years, and it would be a good way for Saylor to prove without a doubt that he uses lightning. But he didn’t bother to do this with his Twitter competition, and we are instead expected to rely on screenshots of a Twitter DM as proof. While on the topic of Michael Saylor, isn’t it odd that he went from saying “Bitcoin’s days are numbered. It seems like just a matter of time before it suffers the same fate as online gambling” in 2013, to suddenly becoming the Bitcoin messiah, seemingly overnight, in 2020. Also consider the fact that in 2013 Bitcoin functioned well as a payment system, but in the last few years the experience, particularly with lightning, has significantly degraded. Really all Saylor did was invest a bunch of other people’s money in Bitcoin, at the peak of the market, and he is being hailed as a hero for doing so. I do believe that, from what I have seen, there appears to be a concerted effort among various media outlets and prominent figures like Saylor. Whereby attempts are being made to prop up the lightning network and create an illusion that it is functioning like a well-oiled machine and doing well in terms of growth. This has been going on for years and is not something new. Recently I saw an article hyping the fact that there is now 5000 BTC locked in the lightning network, but a few whales putting money in does not prove that anyone is using it. Certainly, it’s not something to be bragging about when the amount of BTC locked on competing cryptocurrency, Ethereum, is 50x higher at 250,000 BTC. Then we have an op-ed by El Salvador’s President Bukele, who describes himself as the world’s coolest dictator. The article tells readers to “stop drinking the elite’s kool-aid” and attempts to paint Bitcoin as being money for the people when, given current circumstances, it couldn’t be further from it. This also coming from the authoritarian who forced the people of El Salvador to accept Bitcoin against their will, making them use custodial wallets like Chivo and Strike. Not everyone is continuing to buy this nonsense however and recently a trend has emerged where, BTC maximalists have begun to rebel against the very narratives they helped propagate. Take for example Bitcoin developer Matt Corallo who co-founded Blockstream, the company behind the lightning network and who steered Bitcoin development away from on-chain scaling. Corallo put out a tweet thread where he stated that “Bitcoin maxis are a dying breed” and that Bitcoin is losing its appeal as smart money has moved on to other projects like Ethereum. Another Bitcoin and Lightning Network developer, Rene Pickhardt, reluctantly criticized Jack Mallers for falsely advertising the capabilities of lightning at the Bitcoin 2022 conference. Pickhart admitted that the lightning network is “unreliable by design”. Further he went on to say that he felt it was risky to introduce the technology to major companies because, in its current state, they would likely reject it.  Then we have Udi Wertheimer, who very much appears to be on the attack against his former comrades. One spicy take of his was in response to BTC maximalist Stephan Livera, who said “if twitter implemented a simple lightning paywall for new account creation they could dramatically cut down on the spam.” Udi responded, “it would also dramatically cut down on humans because no one uses lightning”. In addition to this Udi has been asking very sensible questions like, if we couldn’t convince OpenSea to accept lightning, how are we going to convince nations? Normally its at this point when you get banned from r/bitcoin. Bitcoin’s Lightning Network inherently sucks, and it is promising to see that people who may have previously been fooled are coming to terms with that reality. Originally, those promoting lightning told us it would be ready in 18 months, then years and now it seems indefinitely. But as time progresses, the only lightning tools and services that seem to be making any progress are the ones which resemble the legacy banking system. To me it seems painfully obvious, the people directing this from the top are stalling. That then begs the question, what for? Do they really intend for Bitcoin’s lightning to be universally adopted or is it just a placeholder for CBDC’s? That’s all for this video guys. Thanks for watching and if you enjoyed it, make sure to hit the like button, share the video and subscribe. I’ll see you next time.
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