Lightning Network, a technology often touted as the solution to Bitcoin’s scalability problem, has been growing leaps and bounds in popularity in the recent months in spite of being at a nascent stage.
The technology has been tested successfully for processing micro-transactions swiftly. But it seems Lightning Network still struggles with transferring bigger amounts.Lightning Network can only ensure 100 percent success rate for transactions of up to three cents, a report by cryptocurrency research firm Diar suggests.
The publication found that anytime someone uses the Lightning Network to transfer a sum larger than $5, there is 50-percent chance the transaction could fall through. The chance of failure is even more striking with bigger amounts. Sending $490 – the maximum amount currently allowed on the network – has only one-percent chance of success.
Diar sourced the data from Reddit user YeOldDoc who used lnmainnet.gaben.win to plot the probability of successfully routing a payment between random nodes on the Lightning Network. YeOldDoc made the calculations based on how many nodes have the capacity to route a payment of that size.
One interesting takeaway from the Diar research is that despite its rapid channel growth, Lightning Network has yet to improve the transaction efficiency of its system.
As pointed out by Cornell University computer science professor Emin Gün Sirer, the number of Lightning Network routes has grown 10 times in the past five months, but the probability of successful routing has not increased at all.
Developers have been implementing Lightning Network payments for fun activities online in order to test its utility for micro-transactions. This includes playing Pokemon with it, buying candies, or doodling penises on a graffiti board. But, we are yet to see any implementation for payments above a few dollars.
The total network capacity of Lightning Network crossed $150,000 in Aprilwith more than 2,000 active running nodes and 6,600 channels. At the time of writing, the total network capacity seems to be still nearly the same, with more than 2,500 nodes and 7,800 channels. Lightning Network acts as a “second layer” to a payments blockchain, allowing for faster transactions with very little transaction fees.
The Network works by creating “channels” between nodes.Any two nodes on the Lightning Network can agree to hold their coins on a common wallet. The channel is essentially a multi-sig wallet — where the consent of both parties are required before funds can be moved out. This wallet is then registered on the blockchain.
This process means that the wallet now acts as a ‘payments channel,’ which can be used to pay the cryptocurrency without requiring to register the transaction on the blockchain. When they finally close the channel, the resulted transaction is recorded on the blockchain as one transaction. This allows the two parties to carry out swift transactions with low fees, as their transactions don’t have to wait for miner confirmations every time.
This doesn’t mean that you need to create a channel every time you want to transact with someone. You can use existing channels of the people you are connected with. But there is a catch. For the transaction to go through, everyone involved in the transaction will have to be online. This includes you, the person you are sending the money to, and, if you are using someone else’s channel, then they have to be online as well.
In addition, the channel — you are making the transaction through — should have enough funds to support your transaction, that is, twice the amount of the transaction value.This is what gives rise to the payments not going through for larger amounts. Through current means, if you want Lightning Network to process large transactions, you need nodes that can create larger channels that can always be online.
Clearly, individuals are less likely to fit the bill.Large cryptocurrency exchanges can create Lightning channels to increase its network capacity and increase the probability of transactions going through. But as Diar points out, opening up a Lightning channel will likely land them in regulatory trouble.
The exchanges are required to perform know-your-customer (KYC) and anti-money-laundering (AML) checks on users of their platforms. Through Lightning Network, while you can do this for channel creators, they can’t control where the actual transactions are routed.It is important to remember that the technology is still in its nascent stage.
With subsequent improvements, and an increased number of nodes (therefore, channels), it might ensure that Bitcoin lives up to its creator’s vision as a peer-to-peer electronic form of money that can be used for everyday transactions.
Update 16:30 UTC, June 26: Lightning Labs co-founder and chief technology officer Olaoluwa Osuntokun has since downplayed the methodology used in Diar’s research.
“Based on what I can find with respect to methodology used to generate these metrics, […] the model itself is flawed, and produces flawed metrics,” he told Hard Fork over email.
Among other things, Osuntokun noted that the research failed to factor out Lightning Network channels that simply do not offer support for transactions larger than their specified amount.
“When one takes into account how Lightning Network works, this is akin to saying ’the probability of room that fits 10 people will be able to fit 50 people is 0 [percent],’” he said.
(For the record, Diar and the Redditor who originally provided the data claim they did remove nodes with insufficient capacity from their samples.)
Another issue in Diar’s methodology is that it assumes the maximum transferrable amount is $490. Osuntokun has clarified that the maximum payment size on the Lightning Network currently stands at 4,294,967 satoshis – or about $260 at the time of writing.
“By not removing channels which have a total capacity that’s less than the target amount to be sent, the results of the model are greatly skewed, as they include nonsense data points,” Osuntokun added.
https://thenextweb.com/hardfork/2018/06/26/lighting-network-transactions/
The technology has been tested successfully for processing micro-transactions swiftly. But it seems Lightning Network still struggles with transferring bigger amounts.Lightning Network can only ensure 100 percent success rate for transactions of up to three cents, a report by cryptocurrency research firm Diar suggests.
The publication found that anytime someone uses the Lightning Network to transfer a sum larger than $5, there is 50-percent chance the transaction could fall through. The chance of failure is even more striking with bigger amounts. Sending $490 – the maximum amount currently allowed on the network – has only one-percent chance of success.
Diar sourced the data from Reddit user YeOldDoc who used lnmainnet.gaben.win to plot the probability of successfully routing a payment between random nodes on the Lightning Network. YeOldDoc made the calculations based on how many nodes have the capacity to route a payment of that size.
One interesting takeaway from the Diar research is that despite its rapid channel growth, Lightning Network has yet to improve the transaction efficiency of its system.
As pointed out by Cornell University computer science professor Emin Gün Sirer, the number of Lightning Network routes has grown 10 times in the past five months, but the probability of successful routing has not increased at all.
Developers have been implementing Lightning Network payments for fun activities online in order to test its utility for micro-transactions. This includes playing Pokemon with it, buying candies, or doodling penises on a graffiti board. But, we are yet to see any implementation for payments above a few dollars.
The total network capacity of Lightning Network crossed $150,000 in Aprilwith more than 2,000 active running nodes and 6,600 channels. At the time of writing, the total network capacity seems to be still nearly the same, with more than 2,500 nodes and 7,800 channels. Lightning Network acts as a “second layer” to a payments blockchain, allowing for faster transactions with very little transaction fees.
The Network works by creating “channels” between nodes.Any two nodes on the Lightning Network can agree to hold their coins on a common wallet. The channel is essentially a multi-sig wallet — where the consent of both parties are required before funds can be moved out. This wallet is then registered on the blockchain.
This process means that the wallet now acts as a ‘payments channel,’ which can be used to pay the cryptocurrency without requiring to register the transaction on the blockchain. When they finally close the channel, the resulted transaction is recorded on the blockchain as one transaction. This allows the two parties to carry out swift transactions with low fees, as their transactions don’t have to wait for miner confirmations every time.
This doesn’t mean that you need to create a channel every time you want to transact with someone. You can use existing channels of the people you are connected with. But there is a catch. For the transaction to go through, everyone involved in the transaction will have to be online. This includes you, the person you are sending the money to, and, if you are using someone else’s channel, then they have to be online as well.
In addition, the channel — you are making the transaction through — should have enough funds to support your transaction, that is, twice the amount of the transaction value.This is what gives rise to the payments not going through for larger amounts. Through current means, if you want Lightning Network to process large transactions, you need nodes that can create larger channels that can always be online.
Clearly, individuals are less likely to fit the bill.Large cryptocurrency exchanges can create Lightning channels to increase its network capacity and increase the probability of transactions going through. But as Diar points out, opening up a Lightning channel will likely land them in regulatory trouble.
The exchanges are required to perform know-your-customer (KYC) and anti-money-laundering (AML) checks on users of their platforms. Through Lightning Network, while you can do this for channel creators, they can’t control where the actual transactions are routed.It is important to remember that the technology is still in its nascent stage.
With subsequent improvements, and an increased number of nodes (therefore, channels), it might ensure that Bitcoin lives up to its creator’s vision as a peer-to-peer electronic form of money that can be used for everyday transactions.
Update 16:30 UTC, June 26: Lightning Labs co-founder and chief technology officer Olaoluwa Osuntokun has since downplayed the methodology used in Diar’s research.
“Based on what I can find with respect to methodology used to generate these metrics, […] the model itself is flawed, and produces flawed metrics,” he told Hard Fork over email.
Among other things, Osuntokun noted that the research failed to factor out Lightning Network channels that simply do not offer support for transactions larger than their specified amount.
“When one takes into account how Lightning Network works, this is akin to saying ’the probability of room that fits 10 people will be able to fit 50 people is 0 [percent],’” he said.
(For the record, Diar and the Redditor who originally provided the data claim they did remove nodes with insufficient capacity from their samples.)
Another issue in Diar’s methodology is that it assumes the maximum transferrable amount is $490. Osuntokun has clarified that the maximum payment size on the Lightning Network currently stands at 4,294,967 satoshis – or about $260 at the time of writing.
“By not removing channels which have a total capacity that’s less than the target amount to be sent, the results of the model are greatly skewed, as they include nonsense data points,” Osuntokun added.
https://thenextweb.com/hardfork/2018/06/26/lighting-network-transactions/