Highlights from Lightning Labs’ Ask Me Anything session with OKX community
On Feb. 18, Lightning Labs’ business development lead, Ryan Gentry, and infrastructure lead, Alex Bosworth, joined a live Ask Me Anything session on the official OKX Telegram channel and answered questions posted by users.
The purpose of the event was to introduce Lightning Network as a platform to the OKX community and discuss future developments.
The following is a recap of the AMA.
Since OKX will be a participating node in the Lightning Network, can you elaborate on the role of participating nodes and how the onboarding of OKX facilitates the Lightning Network’s adoption?
Alex: That’s a great question. The Lightning Network is creating a new standard for transacting online. Lightning is a network of payment channels that make it faster and cheaper to send Bitcoin across the world. Each new, well-managed node that joins the Lightning Network improves the network’s utility for all existing participants.
Major exchanges joining the network with large, well-connected and efficiently run nodes exponentially benefits the network. We expect OKX’s node to contribute to this network effect, improving liquidity and payment success rates for all.
Users may not be familiar with the key metrics of LN’s performance, such as network capacity, distance measures and other connectivity measures. Can you briefly explain these terms and how they reflect the Lightning Network’s health?
Ryan: Key metrics of LN include:
- Network capacity: Amount of Bitcoin committed to public 2:2 channels in the network (and not all channels need to be public!).
- Distance and graph metrics: The number of hops required to traverse the network.
- Connectivity metrics: The level of connectivity retained if specific nodes are added or removed from the network (betweenness centrality being a key one!).
It is important to note that these are public metrics. They help indicate network health, but due to the private nature of Lightning balances and private Lightning channels, they are limited in illustrating the exact capacities and capabilities of the network.
Statistics from 1ML actually show that the nodes in the Lightning Network are concentrated in developed countries such as the United States, Germany and Canada. However, emerging economies like Argentina and Nigeria are starting to embrace Bitcoin, and their Google searches for the same have reached all-time highs. These economies show huge potential for BTC adoption. How can the Lightning Network capitalize on these opportunities?
Alex: Let’s let roasbeef [i.e., Olaoluwa Osuntokun, CTO of Lightning Labs] take this one. I will type his response:
Lightning can help users in countries like Nigeria and Argentina get started with Bitcoin by lowering the barrier to entry and allowing these users to send and receive small amounts of value over the network.
These low values would typically be impossible to move on-chain due to the high transaction fees for such small amounts.
These new users can download mobile wallets and access fiat on-ramps directly onto the Lightning Network.
The Lightning startup community has also built many projects and companies that these users can access, including apps for micro-earning, satoshi-rewards programs, and even games built on Bitcoin.
The Lightning Network opens the possibility for these communities to access a truly global and entirely virtual economy.
Despite the current BTC bull run, stats from Bitcoin Visuals indicated that the capacity of the Lightning Network has been declining since September 2020.
Ryan: The public graph metrics of the Lightning Network are very limited in revealing the transactional activity and true amount of on-chain commitments, due to the nature of the network.
Although some of these public metrics indicate reduced capacity, it is most likely due to an early over-commitment of capital from enthusiasts in the early days of the network and not a reduction in network activity.
On a higher level, Lightning is like a transport network for satoshis, and you can view channels as the roads and highways that allow users to send funds over those channels. Given a fixed amount of capacity, Bitcoin can continually recirculate within those channels, similar to people commuting back and forth to work.
As a result, the total capacity in the network could remain relatively constant, while the actual activity among the lanes (i.e., the roads) grows rapidly. In this latest Bitcoin run-up, many Lightning routing nodes, services and merchants are seeing their routing/payment volume in the network steadily increase.
Lightning Labs recently released Lightning Pool, a marketplace where node operators can buy the liquidity they need to run the network. How does this facilitate the growth of liquidity mining?
Alex: Pool lets users “lease” their Bitcoin to other nodes on the network that need inbound liquidity for receiving payments.
Many users want to earn a yield on their Bitcoin, so the supply side of the market has been growing steadily.
As Lightning Network adoption grows, many different businesses will need the inbound liquidity sold through Pool — merchants, exchanges, wallets, remittance businesses and more — so we expect the demand side of the market to grow as well.
As demand grows, it will increase interest rates and encourage more supply to enter the market.
The advent of COVID-19 has led to increased demand for online shopping, which presents huge opportunities for micropayments. How can the Lightning Network capitalize on these opportunities?
Ryan: As more of our lives have transitioned online over the past year, commerce sites powered by Lightning, like Bitrefill, Fold and NeutronPay, have experienced significant growth.
We expect this trend to accelerate as more exchanges, like OKX, integrate the Lightning Network and expose their user bases to the speed and efficiency of payments over the Lightning Network. The Lightning Network not only makes instant, cross-border transactions possible for consumers, it also benefits merchants in circumventing chargeback fees often associated with traditional payment flows.
Lightning significantly improves the online shopping experience for both users and merchants, so we expect to see Lightning-integrated commerce increase alongside online shopping demand.
Compared to the end of 2017, the current Bitcoin bull run is mainly driven by institutional demand. What’s your take on the future of Bitcoin? Do you believe Bitcoin can fulfill its vision as a decentralized P2P currency, or will it become a new “asset class” for financial investments only?
Alex: Bitcoin was created with the intention of serving as a “peer-to-peer electronic cash system,” and Lightning is helping achieve that today.
By setting the stage for decentralized, instant and virtual transactions, Lightning is bringing Bitcoin to the next billion people.
Over time, it will grow to support increasingly large payments and serve as the primary mechanism through which people interact with Bitcoin as the global reserve currency.
The future of Bitcoin-the-asset is to grow beyond institutions into even larger investment vehicles such as sovereign wealth funds — and beyond that, into nation-state capital reserves, eventually replacing all fiat currencies across the world.
For large-scale financial investments, the issuance schedule remaining decentralized, and thus stable and reliable is the key feature in reaching the vision of a new world currency.
What is the biggest hurdle for the Lightning Network at this moment?
Ryan: Awareness and adoption! Privacy and decentralization are core values of the Lightning Network, which make it difficult to display metrics like total network transaction volume. We are working hard with partners like OKX and others to let users experience Lightning for themselves, and see just how well the network works today.