One of the developers of Lightning Alex Bosworth is considered to be the sender of the first real transaction on the Lightning main network. On December 27, shortly after the successful testing of the protocol, he reported on topping up his mobile balance with the help of a Lightning payment through the Bitrefill service. And on January 20, the Reddit user under the name btc_throwaway1337, described the "first physical purchase" via Lightning, as he purchased a VPN router from the TorGuard provider, which had earlier announced the support of Lightning payments. In February, the most famous pizza buyer Laszlo Heinitz joined the ranks of the first users. In 2010 he paid 10,000 BTC for a pizza, and this year he bought two pizzas via the Lightning Network.
The Victorious Procession of Lightning
Today, the list of retailers accepting Lightning payments has expanded and includes sellers of clothing, jewelry, books, electronics, as well as cafes and restaurants. A crypto enthusiast under the nickname /u/Bitcoin_21 created a site where all the services and shops using Lightning are collected, and users can add to this list on their own. An interesting implementation of the technology was introduced by a Twitter user under the name Lightning KOala, as he created an on-line board called Satoshi's Place and perfectly demonstrated the possibilities of Lightning as a solution for micro-payments, since drawing one pixel on this board cost him one satoshi (0.00000001 Bitcoins).
Recently, the CoinGate payment operator launched a pilot program allowing more than 100 services to accept Lightning payments without risk. CoinGate took on the responsibility of the "insurer" in case the funds are lost. The program includes online stores that provide a wide variety of products and services, such VPN providers and hosting services, betting and online game sites, ski and snowboard rental service, a Norwegian restaurant, an organic food store, a wooden clock shop, and two porn websites.
More than 11,000 payment channels are already functioning in the Lightning Network, and in July, the volume of funds transmitted through these channels reached a historical maximum as it exceeded 100 Bitcoins (about $700,000 at that time) for the first time.
Mistakes of Youth
The network is actively developing not only from the user side but also from the technical side. Back in January, the developers warned the first users about the risks and possible bugs, calling for the use of a test network. A number of services deliberately chose to use the live version of Lightning, however, arguing that real practice is "the best way to strengthen" the network and rid it of bugs, while the test network does not offer "the same adrenaline."
The network succumbed to failure first in March, when the "warring camp" of SegWit2x supporters carried out a DDoS attack on the Lightning Network. According to Bosworth, this was not the first attack of this kind.
While evolving, however, Lightning is developing protective mechanisms. Thus, the co-founder of Lightning Labs, Olaoluwa Osuntokun, is engaged in a security system that is designed to prevent fraudulent transactions. If an attacker attempts to conduct a transaction that steals money from another user, the victim has time to repel the attack. But to do this, the holder of the cryptocurrency must constantly monitor their accounts. "The price of scalability is eternal vigilance," says Tadge Dryja, co-author of the Lightning Network protocol. And this function Osuntokun offers to transfer to monitoring organizations, the so-called "watchtowers,” which will notify the user in case of threats. This approach does not cancel decentralization, as the user can connect to any number of watchtowers without relying solely on one "sentinel.”
Other concerns of the developers are regarding privacy, centralization, the large amount of data that the network has to store, and the dispute resolution mechanism. Various development teams are actively offering solutions to these issues and some of them, however, such as the onion-routing for routing payments, have already been implemented in the protocol.
Money Is Not Important
The Lightning Network is in the making and will change with time. And, as it becomes clear, one of these changes will affect commissions in the network. In December, when topping up his mobile account through the Lightning Network, Bosworth wrote that the transaction was instant and without fees. Today, the average commission in the Lightning network is about one satoshi per hop (hops measure the distance between the Lightning nodes since the payment during the routing process must pass through several nodes). The commission receives and appoints node operators for its "contribution" to the delivery of the payment. Bosworth said that his monthly income from the Lightning Network is . . . $2.
And although this is a ridiculous amount, the formation of the commissions market is an important stage in the development of the Lightning network, and Bosworth himself assigns a big role to it: " I think for many people, even OG HODLers, the satoshis earned for providing routing will be among the first BTC they ever earn outside of coin trading. I've had multiple situations even within the Bitcoin economy where I couldn't get paid BTC. The earning niche may be found in P2P," as Bosworth wrote in a recent tweet.
At the moment, there are 3,170 nodes in the Lightning network, but not everyone can become an operator. To manage a node of the Lightning Network (and get the first earnings in Bitcoins or, more accurately, in satoshi), one needs some technical experience and a fairly large amount of memory on the device. For routing Lightning payments, one needs to download a full node of Bitcoin at about 200 GB of data and the Lightning software itself.
While running the node, the user must update the settings in the fees section (by default they are zero). Recently, this functionality has been added to one of the popular Lightning software, the LND. Now, users can determine the size of the commission and track their income there. According to Bosworth, adding such an option to the LND will "stimulate more activity [in levying] commissions."
The Age of Enthusiasts
One of the possible reasons for such low commissions in the network is in the competitive aspect, as in order to attract more users to their nodes so it is used in the route of the transaction, the provider cannot charge too high of commissions, otherwise, it will lose to its less selfish "colleagues.” Even the nodes with the lowest charges, however, are not always popular, since many Lightning nodes still do not charge commissions at all, as they are most likely owned by enthusiasts who support the network for the sake of interest in the technology of Lightning itself and its promotion. Bosworth believes that many people bypass his node, preferring free alternatives, and those who still send payment through it may simply not be able to build a free "bypass" route.
Many developers are sure that this will not always be so, and they consider the introduction of commissions as a positive aspect. "As the network grows and a smaller portion are using it for ideological reasons, fees will move toward a more economic outcome," says Ben Woosley, developer of the Zap Lightning wallet.
In his opinion, even if the fees remain minimal, they can be useful for a number of reasons. First, the network needs liquidity. Each Lightning node carries a certain amount of liquidity. How much money can be transferred through it is based on how much money the node operator has blocked in the channel. Channels with more funds will be able to support larger payments or simply more payments. As Bosworth believes, the node has the right to charge a commission for such services. In addition, the commissions "provide a way for nodes to encourage people to use their channels or vice versa," says Woosley.
Bosworth notes that individual Lightning payments, for example, the exchange of one cryptocurrency for another, are more complex and, therefore, may be more expensive in terms of commissions.
A so-called "negative fee" is possible in the Lightning network, when the user does not pay the operator of the node, but the operator pays the user for selecting it when plotting the route of his transaction. This is useful if the channel ends with funds and the operator wants to attract more incoming transactions.
Projections for the Future
"I think that the system of payment routing will eventually emerge, ‘I scratch your back, and you scratch mine,’” wrote the developer of Lightning under the name ZmnSCPxj. That is, in the general interest, operators will maintain low commissions.
"This is a market, and therefore it will be very difficult to predict [prices]," Bosworth said. Many developers believe that the fees will remain low enough since the installation of nodes and the routing of payments in the Lightning network is not economically costly. For the same reason, the co-authors of the Lightning protocol Tadge Dryja and Joseph Poon in 2016 predicted that the commissions would be "virtually zero."
Woosley believes that commissions in the Lightning network will always be less than a cent, and this can help Bitcoin become a working alternative to Visa and Mastercard. "Credit cards charge about three percent, so Lightning, perhaps, will be much cheaper than credit cards," said Woosley.