To: s7r@sky-ip.org, bitcoin-dev@lists.linuxfoundation.org
References: <561E2B09.3090509@sky-ip.org>
From: Paul Sztorc <truthcoin@gmail.com>
Message-ID: <561E7283.2080507@gmail.com>
Date: Wed, 14 Oct 2015 11:19:31 -0400
User-Agent: Mozilla/5.0 (Windows NT 6.1; WOW64; rv:38.0) Gecko/20100101
	Thunderbird/38.3.0
MIME-Version: 1.0
In-Reply-To: <561E2B09.3090509@sky-ip.org>
Content-Type: multipart/alternative;
	boundary="------------040003090708040406040600"
Subject: Re: [bitcoin-dev] Lightning Network's effect on miner fees
Precedence: list

This is a multi-part message in MIME format.
--------------040003090708040406040600
Content-Type: text/plain; charset=windows-1252
Content-Transfer-Encoding: 7bit

LN transactions are a substitute good for on-chain transactions.

Therefore, demand for on-chain transactions will decrease as a result of
LN, meaning that fees will be lower than they would otherwise be.

However, the two are also perfect compliments, as LN transactions cannot
take place at all without periodic on-chain transactions.

The demand for *all* Bitcoin transactions (LN and otherwise) is itself a
function of innumerable factors, one of which is the question "Which
form of money [Bitcoin or not-Bitcoin] do I think my trading partners
will be using?". By supporting a higher rate of (higher-quality) Bitcoin
transactions, the net result is highly uncertain, but will probably be
that LN actually increases trading fees.

On 10/14/2015 6:14 AM, s7r via bitcoin-dev wrote:
> Hello,
>
> I am reading about the Lightning Network and the BIPs which need to be
> deployed until it can be fully functional. I have to say it's a neat
> solution to scale and have almost instant transactions in a peer 2
> peer, distributed and trustless way. I already knows what the needed
> BIPs are and what each one does, I am curios about the impact this
> will have on miner fees.
>
> If transactions happen in a big percent offchain, and they are only
> broadcasted on the mainchain where funds are moved in or out of the
> lightning network, this means there will be less transactions on the
> mainchain -> less fees collected by the miners. What will happen when
> the block reward will go away? Either the fees for the little amount
> of onchain transactions will increase to unpractical levels, either
> the miners will find it not profitable to keep their hardware plugged
> in to mine, so will leave and the effect will be that the hashing
> power of the network will decrease. Since the network's hashing power
> is a security feature (it makes some attacks impossible or insanely
> expensive) I think it's important to anticipate what will happen in
> this scenario.
> _______________________________________________ > bitcoin-dev mailing list > bitcoin-dev@lists.linuxfoundation.org >
https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev


--------------040003090708040406040600
Content-Type: text/html; charset=windows-1252
Content-Transfer-Encoding: 7bit

<html>
  <head>
    <meta content="text/html; charset=windows-1252"
      http-equiv="Content-Type">
  </head>
  <body bgcolor="#FFFFFF" text="#000000">
    LN transactions are a substitute good for on-chain transactions.<br>
    <br>
    Therefore, demand for on-chain transactions will decrease as a
    result of LN, meaning that fees will be lower than they would
    otherwise be.<br>
    <br>
    However, the two are also perfect compliments, as LN transactions
    cannot take place at all without periodic on-chain transactions.<br>
    <br>
    The demand for *all* Bitcoin transactions (LN and otherwise) is
    itself a function of innumerable factors, one of which is the
    question "Which form of money [Bitcoin or not-Bitcoin] do I think my
    trading partners will be using?". By supporting a higher rate of
    (higher-quality) Bitcoin transactions, the net result is highly
    uncertain, but will probably be that LN actually increases trading
    fees.<br>
    <br>
    On 10/14/2015 6:14 AM, s7r via bitcoin-dev wrote:<br>
    <blockquote type="cite">Hello,<br>
      <br>
      I am reading about the Lightning Network and the BIPs which need
      to be<br>
      deployed until it can be fully functional. I have to say it's a
      neat<br>
      solution to scale and have almost instant transactions in a peer 2<br>
      peer, distributed and trustless way. I already knows what the
      needed<br>
      BIPs are and what each one does, I am curios about the impact this<br>
      will have on miner fees.<br>
      <br>
      If transactions happen in a big percent offchain, and they are
      only<br>
      broadcasted on the mainchain where funds are moved in or out of
      the<br>
      lightning network, this means there will be less transactions on
      the<br>
      mainchain -&gt; less fees collected by the miners. What will
      happen when<br>
      the block reward will go away? Either the fees for the little
      amount<br>
      of onchain transactions will increase to unpractical levels,
      either<br>
      the miners will find it not profitable to keep their hardware
      plugged<br>
      in to mine, so will leave and the effect will be that the hashing<br>
      power of the network will decrease. Since the network's hashing
      power<br>
      is a security feature (it makes some attacks impossible or
      insanely<br>
      expensive) I think it's important to anticipate what will happen
      in<br>
      this scenario.<br>
    </blockquote>
    <span style="white-space: pre;">&gt; _______________________________________________
&gt; bitcoin-dev mailing list
&gt; <a class="moz-txt-link-abbreviated" href="mailto:bitcoin-dev@lists.linuxfoundation.org">bitcoin-dev@lists.linuxfoundation.org</a>
&gt; <a class="moz-txt-link-freetext" href="https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev">https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev</a></span><br>
    <br>
    <br>
  </body>
</html>

--------------040003090708040406040600--