While the Bitcoin LN is live, it is still tested with small transactions and has revealed serious flaws.
The Lightning Network is finally here, live with real Bitcoin transactions. However, improving the protocol is one of the biggest challenges. So far, the LN has been only used as a novelty, for small-scale transactions, and there have been reports of losses.
A few days ago, the LN was tested with a concerted DDOS effort, which caused the loss of 20% of nodes. But a recent commentary also noted other flaws in the network, starting with the fact that the entire number of nodes is very small compared to the Bitcoin Core network of nodes. The largest number of LN nodes reached around 1,000. At the same time, Bitcoin Core nodes have grown in the past months, to 9,277, from around 7,000 during the time of the SegWit2X debates.
And even with a growing number of nodes, the inefficient channels between them mean that the Lightning Network is rather disorganized and unpredictable in handling transactions. The chief problem is finding a suitable route between recipients, in addition to the small general capacity of the network. Even with more than 1,100 nodes reported, the network does not handle transactions above $35, and the general daily load is worth around $50,000.
Additionally, the distribution of nodes is showing growing centralization, as large entities immediately started running best-visited nodes, thus creating local monopolies. Centralization makes the network fragile, as there are key connections linking various parts of the network. Unfortunately, in the past weeks, some of those crucial nodes have disappeared, changing radically the paths that a transaction would need to take.
But the usage of the technology still depends on voluntary participation, as well as a general interest in using this type of payment channel.
Imo Bitcoin’s Lightning Network could make altcoins dissolve, just like Google’s PageRank removed the need for most other search engines. Diversity is often lauded in the phase of deplorable user experience. Once past a threshold, strong network effects kick in.
The LN and other efforts to improve Bitcoin are a part of the drive for Bitcoin dominance, where separate altcoins with other features would be redundant, since improvements to Bitcoin would make it usable for more things than a store of value.
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