After simulating lightning network traffic for almost a year, a new research report gives a series of information.
This paper entitled "Analysis of the Cryptoeconomic Traffic Flow of the Bitcoin Lightning Network" was written by three Hungarian researchers: Ferenc Béres of the Institute of Computer Science and Control, István A. Seres and Sai of Roland University, Hungary András A. Benczúr at Cheney Eastbourne University.
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This study used the Lightning Network Traffic Simulator to simulate the network transaction process, and concluded that the current network transaction rates are not economically viable in the long term. In addition to the immature fee market, the paper also explores the trend of Bitcoin senders using the Lightning Network to take advantage of more direct and fewer private payment paths. This paper proposes a solution to these problems, and also puts forward the significance of the Lightning Network to Bitcoin.
One of the problems of Lightning Network: the economic feasibility of the fee market
Compared to institutional giants such as Visa, which processes about 40,000 transactions per second, the Bitcoin blockchain processes far fewer transactions (7 to 9) per second. Although Bitcoin does not exist to be a Visa, this is exactly the purpose of the Lightning Network: Bitcoin expansion. Therefore, the core idea of the Lightning Network is to allow people to make bitcoin payments off-chain, so that they can perform more seamless operations. Reducing transaction backlogs by creating faster and cheaper payments, while also providing an interesting opportunity for better privacy.
The Lightning Network is run by nodes based on Lightning Technology (BOLT), which is the basis of the Lightning Network protocol. Similar to running Bitcoin nodes on a chain, Lightning Network nodes provide payment routing between senders and receivers, and can get transaction fees from their work.
However, because the Lightning Network is newer and more private than the Bitcoin blockchain itself, the authors of the research paper stated, "As far as we know, there is currently no paper quantifying the economic incentives of Lightning Network routing nodes." Their analysis used The traffic data extracted from the Lightning Network from February to March 2019 was subsequently simulated for estimation.
The paper found:
"Currently, the Lightning Network provides almost no economic incentive for payment routing. The lower routing costs do not fully compensate the routing nodes, because these nodes connect the network together."
In their report, the authors estimate that the daily routing revenue of major routing nodes is about 100,000 Satoshi (about $ 7) at different levels of traffic and payment value.
The developers of Lightning Network have set default transaction fees for node operators. They can follow such rules or set them independently on Lightning Network software. However, node operators can manually adjust their transaction rates without restrictions. This paper describes this tendency to low transaction costs as "economically irrational." However, a PhD in mathematics from Budapest said that this behavior may be more similar to an altruism, similar to the early bitcoin fee market.
Assuming that the node operator wants to obtain a reasonable return on investment from transaction costs, the paper states that the economic incentives of the Lightning Network are not enough. In order to make the node operator's payment routing economically feasible, the paper gives suggestions: either 1) increase traffic, or 2) increase transaction costs.
The author states:
"At this level, many large nodes can increase their transaction costs because they are in a monopoly position."
This means that many large nodes currently have a high proportion in network routing, and they are indispensable. "There are not many options for neighboring nodes."
Lightning Network's second problem: routing privacy
The paper also found that despite the random onion routing, "Since a large part of payments involve individual routing agents, data about the sender and receiver of the payment is easy to collect."
To address this privacy flaw, the authors suggest that you can deliberately choose "non-optimal, longer routing paths to achieve privacy, which will only slightly increase transaction costs." In addition, establish a direct relationship between the sender and receiver. Payment channels can create the best level of privacy.
According to the recommendations given in the paper, if the default transaction costs increase, taking longer, indirect payment paths to protect privacy will cost more. Similar to their concerns about default transaction fees, and in the spirit of Bitcoin's early development, the authors of this article found that privacy responsibility at this stage is still in the user's path.
Are low transaction fees reasonable?
Many developers and node operators in the Lightning Network community are unlikely to agree with the conclusion given in the paper that low transaction costs are economically unreasonable or even problematic.
For example, many Lightning Network node operators are themselves Bitcoin companies, such as Bitrefill, which allows customers to purchase various products and services with Bitcoin through the Lightning Network. Companies like Bitrefill seem to be using the low transaction fees of Lightning Network to serve their customers.
John Carvalho of Bitrefill said:
"If the routing cost itself has a superimposed cost to the participants, it is considered that the lightning routing is economically unreasonable, which is completely short-sighted. At least two main factors must be considered here. First, the lightning network provides It has some characteristics that transactions on the Bitcoin chain do not have, such as high frequency and immediacy. These are functions that people are willing to spend money on. Second, just like Bitrefill, economic participants definitely have their nodes as business The motivation for external expansion, the demand for pure commercial Bitcoin transactions is real. "
Another bitcoin company that uses the Lightning Network's low transaction fees is Sparkswap, an app that allows users to buy Bitcoin directly in US dollars and deposit it in the Lightning Network Wallet.
Sparkswap founder Trey Griffith said:
"From the perspective of routing costs, you might think that our way of operating is economically unreasonable, but if we take our business into account, we will reach a completely different conclusion."
Griffith said that because Bitcoin companies dominate the Lightning Network's routing, it is difficult to draw meaningful conclusions from the paper's data, such as why a triangular routing is formed.
Griffith agrees that transaction fees will increase over time, while Carvalho acknowledges that "over time they may approach levels on the chain … and then predictable rate rankings: Bitcoin chain> Lightning Network> Junk currency."
Does the Lightning Network fee increase?
According to researcher Seres, the ultimate hazard of the low transaction cost of Lightning Network "may be that nodes will exit the network, resulting in lower and lower payment channel capacity."
In October 2019, Rusty Russell, the developer of Blockstream, pointed out a problem with the default setting of low transaction fees.
In a message to the Lightning Network developer mailing list, Russell noticed that two-thirds of the node operators adopted default transaction fees. This means that most nodes on the Lightning Network will not reselect rates.
Russell pointed out that accepting the default cost means lower reliability, and routing will be slower when trying to find a responding node. He also pointed out that "there is no obvious market signal in terms of fees", which means that the Lightning Network fee market does not look like a real market.
Blockstream researcher and Lightning Network enthusiast Christian Decker further elaborated Russell's point:
"The problem is that there is not much difference in whether to adopt the default fee at present. Once the transaction fee is increased, the node we just set up may be left unattended."
Decker also pointed out that this paper seems to ignore that c-lightning has provided random routing for transaction senders.
"Due to the random nature of routing, increasing the default rate will not cause nodes to be left unattended, but we can still turn the routing to more active nodes."
Looking forward to 2020
Although most of the opinions in this article do not agree with the conclusions of this paper, their concerns do sum up the Lightning Network in 2019 and give some points that they may focus on in 2020.
"Since we started public testing more than a year ago, the Lightning Network community has built a lot of infrastructure to assist this network and learned what is and is not feasible. This has laid the groundwork for our development in the coming years. With the foundation, we expect that many future developments will be more user-oriented, including a simpler user experience and further improved reliability, which can promote user popularity. We agree with the author's point of view that privacy may be the lightning network of 2020 focus."
Carvalho also doesn't consider Lightning Network's low transaction fees to be problematic, and plans to make major improvements in the coming year.
"Ultimately, the characteristics and spontaneity of a peer-to-peer network means that arguments against its rationality must explain the fact that the network still exists, is still evolving, and is used by many companies today. In my opinion, We just touched the surface, and Lightning Network will showcase more applications and participation incentives in 2020. "
In addition, Carvalho pointed out that Lightning Network has never promised to address privacy issues off-chain-this is more a side effect of certain privacy-conscious engineers and users. Moreover, in the context of on-chain data, it can be seen that the transfer of funds in the Lightning Network does not mean that you can effectively attack from the outside.