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From: Hector Chu <hectorchu@gmail.com>
Date: Sun, 9 Aug 2015 23:03:50 +0100
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Subject: Re: [bitcoin-dev] What Lightning Is
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Ok good. We have established it to be a non-trivial cost.
Now, what is the growth complexity of the total cost of the network in
terms of number of connections each hub has to other hubs? And then,
consider a payment channel with many hops in it. The end-to-end users would
have to swallow all the costs of the hubs in the channel.

On 9 August 2015 at 22:57, Patrick Strateman via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:

> The costs of operating a hub are as follows:
>
> Time value of the funds the Hub has locked up in payment channels.
> Enhanced risk of loss of control of private keys (the keys necessarily
> need to be on an internet connected system).
> Operating costs (I expect this will be minimal).
>
> The hub can charge a fee for it's services to recoup these costs.
>
>
> On 08/09/2015 02:45 PM, Hector Chu via bitcoin-dev wrote:
>
> Tom, my understanding is that the money that is debited from a payment hub
> is simultaneously credited from either another payment hub or the person
> making the payment, so that the net funds flow at a payment hub always sums
> to zero. So no, there is no credit advanced by the payment hub to anyone.
>
> Given Mark's previous answer of using CPFP and other tricks to pay for the
> Bitcoin transaction fees, we can assume that Bitcoin fees do not play a
> part in the payment channel balances.
>
> So, the interesting question is what are the costs of running a payment
> hub? The tx fees that a payment hub would have to pay to settle its Bitcoin
> transactions would be passed on as a cost to the clients of the payment
> hub. Also there is a cost to locking up funds in a payment channel (time
> value of money). The lost interest or opportunity cost on those funds would
> need to be paid for by its clients as well. And don't forget normal running
> costs such as networking and electricity.
>
> On 9 August 2015 at 22:27, Tom Harding via bitcoin-dev <
> bitcoin-dev@lists.linuxfoundation.org> wrote:
>
>> On Aug 9, 2015 11:54 AM, "Mark Friedenbach" <mark@friedenbach.org> wrote:
>>
>> > On the contrary the funds were advanced by the hub on the creation of
>> the channel. There is no credit involved.
>>
>> That's a chuckle.
>>
>> As I said, nothing requires the hub to advance anything, and if it does,
>> Bob can expect to pay for it.
>>
>> We'll see whether hubs assess a fee for depositing funds, whether the fee
>> depends on the amount deposited, and whether it depends on the amount of
>> time it stays there.
>>
>> I predict "all of the above." There is a name for these kinds of fees.
>> Can you guess it?
>>
>> _______________________________________________
>> bitcoin-dev mailing list
>> bitcoin-dev@lists.linuxfoundation.org
>> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>>
>>
>
>
> _______________________________________________
> bitcoin-dev mailing listbitcoin-dev@lists.linuxfoundation.orghttps://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>

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<div dir=3D"ltr">Ok good. We have established it to be a non-trivial cost.<=
div>Now, what is the growth complexity of the total cost of the network in =
terms of number of connections each hub has to other hubs? And then, consid=
er a payment channel with many hops in it. The end-to-end users would have =
to swallow all the costs of the hubs in the channel.</div></div><div class=
=3D"gmail_extra"><br><div class=3D"gmail_quote">On 9 August 2015 at 22:57, =
Patrick Strateman via bitcoin-dev <span dir=3D"ltr">&lt;<a href=3D"mailto:b=
itcoin-dev@lists.linuxfoundation.org" target=3D"_blank">bitcoin-dev@lists.l=
inuxfoundation.org</a>&gt;</span> wrote:<br><blockquote class=3D"gmail_quot=
e" style=3D"margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">
 =20
   =20
 =20
  <div bgcolor=3D"#FFFFFF" text=3D"#000000">
    The costs of operating a hub are as follows:<br>
    <br>
    Time value of the funds the Hub has locked up in payment channels.<br>
    Enhanced risk of loss of control of private keys (the keys
    necessarily need to be on an internet connected system).<br>
    Operating costs (I expect this will be minimal).<br>
    <br>
    The hub can charge a fee for it&#39;s services to recoup these costs.<d=
iv><div class=3D"h5"><br>
    <br>
    <div>On 08/09/2015 02:45 PM, Hector Chu via
      bitcoin-dev wrote:<br>
    </div>
    <blockquote type=3D"cite">
      <div dir=3D"ltr">Tom, my understanding is that the money that is
        debited from a payment hub is simultaneously credited from
        either another payment hub or the person making the payment, so
        that the net funds flow at a payment hub always sums to zero. So
        no, there is no credit advanced by the payment hub to anyone.
        <div><br>
        </div>
        <div>Given Mark&#39;s previous answer of using CPFP and other trick=
s
          to pay for the Bitcoin transaction fees, we can assume that
          Bitcoin fees do not play a part in the payment channel
          balances.</div>
        <div><br>
        </div>
        <div>So, the interesting question is what are the costs of
          running a payment hub? The tx fees that a payment hub would
          have to pay to settle its Bitcoin transactions would be passed
          on as a cost to the clients of the payment hub. Also there is
          a cost to locking up funds in a payment channel (time value of
          money). The lost interest or opportunity cost on those funds
          would need to be paid for by its clients as well. And don&#39;t
          forget normal running costs such as networking and
          electricity.</div>
      </div>
      <div class=3D"gmail_extra"><br>
        <div class=3D"gmail_quote">On 9 August 2015 at 22:27, Tom Harding
          via bitcoin-dev <span dir=3D"ltr">&lt;<a href=3D"mailto:bitcoin-d=
ev@lists.linuxfoundation.org" target=3D"_blank">bitcoin-dev@lists.linuxfoun=
dation.org</a>&gt;</span>
          wrote:<br>
          <blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;bord=
er-left:1px #ccc solid;padding-left:1ex"><span>
              <p dir=3D"ltr">On Aug 9, 2015 11:54 AM, &quot;Mark Friedenbac=
h&quot;
                &lt;<a href=3D"mailto:mark@friedenbach.org" target=3D"_blan=
k">mark@friedenbach.org</a>&gt;
                wrote:</p>
              <p dir=3D"ltr">&gt; On the contrary the funds were advanced
                by the hub on the creation of the channel. There is no
                credit involved.<br>
              </p>
            </span>
            <p dir=3D"ltr">That&#39;s a chuckle.=C2=A0 </p>
            <p dir=3D"ltr">As I said, nothing requires the hub to advance
              anything, and if it does, Bob can expect to pay for it.</p>
            <p dir=3D"ltr">We&#39;ll see whether hubs assess a fee for
              depositing funds, whether the fee depends on the amount
              deposited, and whether it depends on the amount of time it
              stays there.</p>
            <p dir=3D"ltr">I predict &quot;all of the above.&quot; There is=
 a name
              for these kinds of fees.=C2=A0 Can you guess it?<br>
            </p>
            <br>
            _______________________________________________<br>
            bitcoin-dev mailing list<br>
            <a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org" target=
=3D"_blank">bitcoin-dev@lists.linuxfoundation.org</a><br>
            <a href=3D"https://lists.linuxfoundation.org/mailman/listinfo/b=
itcoin-dev" rel=3D"noreferrer" target=3D"_blank">https://lists.linuxfoundat=
ion.org/mailman/listinfo/bitcoin-dev</a><br>
            <br>
          </blockquote>
        </div>
        <br>
      </div>
      <br>
      <fieldset></fieldset>
      <br>
      <pre>_______________________________________________
bitcoin-dev mailing list
<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org" target=3D"_blank">=
bitcoin-dev@lists.linuxfoundation.org</a>
<a href=3D"https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev" =
target=3D"_blank">https://lists.linuxfoundation.org/mailman/listinfo/bitcoi=
n-dev</a>
</pre>
    </blockquote>
    <br>
  </div></div></div>

<br>_______________________________________________<br>
bitcoin-dev mailing list<br>
<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org">bitcoin-dev@lists.=
linuxfoundation.org</a><br>
<a href=3D"https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev" =
rel=3D"noreferrer" target=3D"_blank">https://lists.linuxfoundation.org/mail=
man/listinfo/bitcoin-dev</a><br>
<br></blockquote></div><br></div>

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