Posted on

Can the Lightning Network Avoid Going Corporate?

Not yet out of beta, hundreds of developers around the world are already experimenting with bitcoin’s newest technology – the Lightning Network – donating time and resources to help lay the groundwork for a more scalable version of the oldest and largest cryptocurrency yet created.

So great has been the effort that there are now more than 1,000 lightning nodes estimated to be running the software on live computers, largely at a loss, but motivated by the greater gain of making the bitcoin network more accessible and affordable. Still, with the network entering its bootstrapping phase, some are beginning to question when the economics of scale may begin to bring new pressures.

As the bitcoin community saw with the rise of cryptocurrency mining, in which at-home mining via PCs was quickly outpaced by industrial operationsprofits attract corporate interests. And experts admit, it’s entirely possible that companies could make money by offering easy access to quick cryptocurrency payments.

“If an entity is going to put a lot of value into payment channels and operate the node for generating profit,” BitGo engineer Jameson Lopp said. “Then it’s probably going to be similar to mining.”

Lopp’s argument is that all networks, no matter how grassroots at the start, eventually give way to specialists who are simply better at offering a more reliable services at a more affordable cost. In the case of Lightning, almost anyone with the technical skills and a little cryptocurrency can run Lightning channels, but offering a service in the future might be different.

For example, users of the network might not always be able to rely on the availability of others they’re sending money to, meaning intermediaries could emerge that offer services with better liquidity and payment routing.

“The [Lightning Network] will effectively centralize bitcoin with ‘channels’ and ‘hubs’ on the sidechains. These hubs will essentially function as banks,” a Twitter user going under the handle @marcotweetss said.

In many critics’ minds, institutions might offer so many of the biggest payment channels that they would essentially coalesce into “hubs.” That’s what Forbes and CoinDesk contributor Frances Coppola pointed out when she tweeted: “Lightning nodes are full-reserve banks, and the network is essentially a correspondent banking scheme.”

Beyond rogue volunteers, there’s also the involvement of companies such as Blockstream, ACINQ, and Lightning Labs, which have done a lot of the heavy-lifting related to the open-source Lightning Network software, and who, in the minds of critics, might be apt to play these roles.

These companies currently offer their services for free, even though they are venture-backed – Lightning Labs recently secured $2.5 million and Blockstream has raised $80 million so far – and as such, it’s believed they’ll eventually need to find a way to generate profits.

This business opportunity worries some cryptocurrency enthusiasts. After all, Silicon Valley startups from Facebook to Twitter have long perfected the model of getting users hooked on a free service, only to later embrace practices at scale that may not have the best interests of users in mind.

Yet, there are several reasons that, for the time being, there’s little need to worry.

Cooperative implementations 

For one, cheap access is emerging as a crucial difference between bitcoin’s blockchain and the Lightning Network.

In this way, MIT researcher Thaddeus Dryja, co-author of the original Lightning Network white paper and the former CTO of Lightning Labs, believes the network will avoid corporate centralization overall because of its design, which doesn’t require expensive or specialized hardware.

According to Dryja, users will be able to freely abandon institutional players that try to exert too much influence over individuals.

Let’s say everyone is using Amazon, for example, and Amazon says we’ll also route payments between users,” Dryja said. “If that node starts doing things people don’t like, it’s very cheap to close it. They never have your money.”

Along those lines, Lightning app developer Elaine Ou, argues that the barrier to entry for providing the default software is low, meaning should one company embrace poor practices, alternatives could quickly arise.

“There are two other Lightning implementations in use already, so I’m not too worried about centralization. The specs are open and updated through an open process,” she said.

None of this is to say the Lightning Network is infallibly egalitarian. The system still favors players with technical and financial resources, since channels need to have money in order to facilitate transactions. Parties with a large amount of capital could offer network nodes with more liquidity.

Dryja told CoinDesk that institutional players will probably factor into this growing network, saying:

“Having more large nodes is more efficient. I think it will be exchanges becoming the dominant players, at least in the first few years, and that’s not great. It would be great if people were running nodes off of Raspberry Pis in their houses.”

That’s why Lightning Labs CEO Elizabeth Stark told CoinDesk that her team strives to make the technology collaborative yet distinct from any company, including her namesake startup, adding: “The Lightning Network specification is open and anyone can build a compatible implementation.”

Lightning developer Jack Mallers, who created the free Zap Lightning wallet, will soon release consumer applications for both mobile and desktop. Those interfaces will make it even easier for average people to use Lightning without relying on corporate channels.

Low barrier to entry

It’s entirely possible that inherent fees could make Lightning too expensive for average users to constantly open and close channels. But so far, this isn’t the case.

Unlike bitcoin mining, which requires a great deal of expensive electricity, it usually costs just a few cents to open a Lightning channel. A channel hosting over 100,000 transactions still costs less than $20 to operate.

“Competition is really high on the network and the barrier to entry is low,” Mallers said, pointing to the fact he’s already gotten 19 volunteer developers to help him build Zap.

He added:

“Similar to the way people have bitcoin wallets on their phone today, eventually what you’ll be able to do is you’ll have a Lightning node on an iPhone or desktop, and it will be contacting other full nodes on the network, totally separate from your machine, pinging it for information.”

In fact, the upcoming Zap interface is just one of several Lightning projects allowing users to run a Lightning node without piggybacking on more complex bitcoin or litecoin nodes. Amazon might someday be able to offer the most efficient nodes, but any tech-savvy person with a laptop or mobile device will be able to tap into its stream.

Thanks to something called a lit or light client, those independent Lightning nodes can talk to other nodes to stay up to date on what is happening in the broader bitcoin network. There are already roughly 500 people participating in Zap group chats through platforms like Slack.

There are certainly tradeoffs. People with light clients won’t have all the blockchain data at their fingertips.

Regardless, this beginner-friendly option makes the lightning network remarkably different than cryptocurrency mining. As for companies like Lightning Labs and Blockstream, they have an economic incentive to avoid becoming legacy middlemen providers.

Reputations at stake

As for the allegations that one of these companies could become another Facebook, there’s reasons that this isn’t exactly likely, either.

Lightning Labs, for instance, benefits from cooperation with developers like Mallers and Ou, who aren’t on Stark’s payroll. For blockchain startups working on this open-source technology, their professional reputation relies on their perceived efforts to keep the bitcoin network mostly decentralized.

Corporate interests generally consolidate power and access, but the bitcoin community has proven it will combat such efforts, such as when a small group of people forked the bitcoin network to create bitcoin gold in an effort to curb industrial miners. Of course, the Lighting Network is much younger than bitcoin, and a split like that could have wider implications for the Lighting community.

If entrepreneurs want to continue spearheading Lightning development, they will have to avoid aligning themselves with any party seeking disproportionate influence.

“We don’t currently operate any Lightning nodes and that’s not part of our plan. We build infrastructure for other people to operate nodes and for the network as a whole,” Stark told CoinDesk.

Lightning Lab’s investor and BitGo CTO Ben Davenport echoed her sentiment, saying, “They are not going to monetize the protocol directly. But there are always opportunities for smart teams, who are early in an important space, to develop business models.”

Dryja told CoinDesk it’s still too early to say how this young technology will impact decentralization at large.

However, Mallers is optimistic because channel operators never take custody of user funds. Plus, anyone with the technical skills can actually choose the path their payments take. It will be easy for cypherpunks to avoid corporate channels. 

“You’re never reliant on any third party. You can even do configuration and choose which path you want to take,” Mallers said. “You can route around certain participants in the network if needed.”

Blockstream developer Rusty Russell believes Lightning’s community pendulum will swing back towards greater decentralization in the long run, and that the barrier to entry is the chief reason.

“It’s easier to accept Lightning payments than it is to accept on-chain [bitcoin] payments. So we’re seeing more people controlling their own payment infrastructure,” he said, adding:

“I think that will increase as we make the entire stack more usable, and it’s an excellent trend for the health of the ecosystem.”

Gas neon tubes image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Bitcoin Lightning Startup Goes Beta With Twitter CEO Backing

A version of bitcoin’s much-anticipated Lightning Network is finally ready for real users.

Announced today, California startup Lightning Labs has officially launched a beta version of its software (LND), making available what investors and project leads say is the first thoroughly tested version of the tech to date. This means that users can now leverage LND to send bitcoin and litecoin to other users, all without settling those transactions on the blockchain.

While this software is one of several seeking to form a combined network that aims to make cryptocurrency transactions faster and cheaper, today’s development effectively takes bitcoin a step closer to new kinds of applications, such as Internet of Things payments and recurring billing.

That’s because, similar to bitcoin, the Lightning protocol isn’t managed by any one person or company. It’s a series of compatible technologies. Bitcoin-centric startup Blockstream released a candidate version 1.0 of the Lightning protocol specification in January, and ACINQ, another like-minded startup, already offers a live, yet unpredictable beta software that works with bitcoin.

Still, the Lightning Labs software is believed to be the most mature software to date – and investors are using the launch to signal their interest.

Also revealed today, Lightning Labs has raised $2.5 million from nearly a dozen investors including Twitter CEO Jack Dorsey, Square Capital executive Jacqueline Reses, litecoin creator Charlie Lee and former PayPal COO David Sacks.

While Dorsey and Reses declined to comment other than to confirm they invested, Sacks was vocal in his belief that the beta release marks a crucial moment in bitcoin’s history.

“Lightning is the most important protocol being built on bitcoin and Lightning Labs is the best developer of that protocol,” Sacks told CoinDesk.

Fellow investor Ben Davenport, CTO at the blockchain security company BitGo, agreed the launch is a pivotal milestone.

He told CoinDesk:

“It’s something the entire community has been focused on and working towards for the better part of two years now. It’s really the culmination of a lot of work by many people, not just Lightning Labs. … We see it as a very important piece of the scaling solution for bitcoin, and perhaps other digital currencies as well.”

Team spirit

To Lee’s point, thousands of people around the world contributed to today’s Lightning release, from volunteer testers who helped find bugs in the original alpha version, to developers like Jim Posen at the exchange platform Coinbase, who contributed code through GitHub.

“The community engagement around Lightning has been amazing,” Lightning Labs CEO Elizabeth Stark told CoinDesk, adding that she plans to keep the software freely accessible. “The protocol will always be open source and right now everything we are making will be open source,” she said.

When Stark asked the audience at a recent decentralization summit in Berlin who had already tested Lightning, hundreds of people raised their hands. “We have around 1,800 people on the Slack for LND alone,” she added. “We already have dozens of apps that developers have built.”

But it’s important to note that even this beta should be used with caution.

Stark’s team built in a few safety measures to limit the amount of cryptocurrency people can send for now to roughly $1,400 worth per channel, or around $400 per payment. The target demographic for the release is developers and “advanced users” who are able to run a full node and use LND’s command-line interface.

Stark went on to warn that users should not experiment with more money than they are willing to lose.

“We were not recommending use on the main bitcoin network before this beta because there are certain features, such as a wallet seed backup, that were not there previously. There are new features included as well, there are bug fixes and stability improvements,” she explained.

Booting up

Still, it’s a release that’s likely to spur interest and engagement, given that developers are already sending money over the network – regardless of warnings.

As such, Stark now expects people with the skills to host their own bitcoin or litecoin node to add Lightning Labs’ free software to the mix for quicker, cheaper transactions. Already, there are already roughly a 1,000 nodes implementing Lightning software. Investors in the project believe the release will boost that growing number.

Davenport said:

“What I hope to see, and am optimistic to see, is a Cambrian explosion of development of Lightning-based apps and other things that incorporate Lightning.”

Several contributors spoke of Lightning as a long-term investment in blockchain infrastructure, something that Lee, whose time is dedicated toward a wholly different protocol, spoke to.

A long-time advocate for Lightning, Lee expressed his hope that even more experiments will now be possible with the software, including transactions that occur across blockchains.

“It’s great to see Lightning Network being used in the real world. I’m also excited to soon being able to do cross-chain atomic swaps between bitcoin and litecoin,” he said.

In this way, Lee’s comments can be seen as summing up the impact of the day’s news.

If bitcoin really is the ground floor of the emerging cryptocurrency ecosystem, then Lightning is the first staircase. This release marks a vote of confidence that the staircase really is safe for builders to start, with cautious steps, climbing up.

Copper wiring image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Lightning at Last? Test Shows Bitcoin Scaling Solution Almost Ready

Bitcoin’s long wait for the Lightning Network is almost over.

Announced today, the startups behind the three most active Lightning implementations have revealed test results, including live transactions, proving their software is now interoperable.

The findings, released by ACINQ, Blockstream and Lightning Labs, effectively bring Lightning (the mechanism many see as the best solution for increasing bitcoin’s capacity) closer to public launch.

And while admittedly technical, today’s announcement offers evidence that makes it seem like enthusiasts will soon get their wish.

Firstly, the Lightning specifications, in progress since last September, have entered version 1. These describe the rules of the network, comparable to the standards that prop up the internet.

While that’s not to say the specifications won’t evolve over time, they’ve now been deemed good enough to support the first real Lightning Network.

According to the founder of ACINQ, Pierre-Marie Padiou:

“This is the Lightning standard we’ve been working on for more than year. There’s been a lot of work from us and from all participants. It’s a big milestone.”

Secondly, all the implementations have been shown to be compatible with one another, based on Blockstream engineer Christian Decker’s over 70 tests, which he put together over the summer.

And last, but not least, as displayed with the two live transactions, the three main implementations of Lightning are indeed interoperable, a piece of the puzzle that developers have been working on since last year.

“We’ve been able to make successful payments on the mainnet that goes all around the world, and which involves different compatible implementations,” Padiou said. “That’s kind of a big deal.”

Interoperable, at last

While Lightning is still not ready for public use, Padiou emphasized that interoperability between the implementations is key to continuing development.

With the specifications complete, other developers now know what rules to implement to build their own Lightning networks. Bitcoin startup Blockchain’s Thunder Network and MIT’s Lit, for example, are two other well-known Lightning projects that could one day also implement the specifications.

And this compatibility between implementations has now been demonstrated with two test transactions, showing how Lightning could be used in the future for small value payments.

One transaction was routed through Blockstream’s C-Lightning nodes to ACINQ’s fake coffee app Starblocks (a play on Starbucks), which sells “Blockaccinos” for 0.015 mBTC.

The other transaction unlocked a blog post on the content platform Yalls. The process used ACINQ’s Eclair wallet to send a tiny fee through C-Lightning to Yalls, which runs on Lightning Lab’s LND software.

The engineers conducted both of these Lightning payments with nodes scattered across the globe, Padiou said.

“It’s a very small network, but it demonstrates how the interoperability works,” Padiou said, adding that this highlights a live proof-of-concept for the scaling mechanism.

No rush

But there’s still one more step before users can take advantage of Lightning: releasing mainnet software.

According to Padiou, each implementation needs to release beta software for the mainnet that allows bitcoin users to make real payments over the Lightning Network for the first time.

And while many are excited about the opportunity, that software will need plenty of work before the dream of paying for morning lattes (and everything else) using bitcoin is realized.

In conversation, Lightning developers stressed there are kinks left to work out with the user experience before they recommend businesses adopt it.

Padiou argued that this cautious approach to development shows developers are making sure they get the technology just right, so as to eliminate the chance of users losing funds.

“It also demonstrates the approach has been very conservative. We’re not going to rush anything,” he told CoinDesk, adding:

“We’re almost there.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstream. 

Laser cutter image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.