As of now, the network can only process around 2,800 Bitcoin, which is around 0.0001% of Bitcoin’s total supply. With the billions worth of Bitcoin being transacted daily, this just isn’t realistic at all.
Payment channels on the Lightning Network also need to be opened and closed by expensive L1 bitcoin transactions. The network can process ~2000 transactions/block and produces ~144 blocks/day, meaning that opening up a payment channel for everyone on earth would take ~72 years, assuming that no one died or had children during that time.
Bitcoin’s Volatility makes LN not feasible.
Putting all the other flaws aside, let’s just pretend the Lightning Network worked perfectly. Why would any person or company opt to use it?
Bitcoin’s extreme volatility is a massive turnoff for many, especially those interested in using it as a payment method.
The price volatility makes it challenging for companies to use Bitcoin as a method of payment when pricing their products to sell to their customers or even to purchase inventory from their suppliers.
Let me use an example to explain this better: Let’s assume the company “WhaleCorp” has to pay an invoice to their supplier of bitcoin. Typically, suppliers give their clients time to pay, such as 30 days. If bitcoin’s price has increased by 10% during the 30 day period, WhaleCorp has to come up with another 10% worth of fiat currency or another cryptocurrency to convert to Bitcoin and pay the invoice to pay the supplier.
This exchange risk exists because the business might be paid by their customers in a fiat currency and not Bitcoin. The exchange risk also exists for consumer transactions since the salary or wages for most individuals are not paid in Bitcoin, leading to transactions being converted from a fiat currency to Bitcoin.
The Lightning Network claims to have no fees, which would be amazing had their network not been fully centralized, and had Bitcoin not been one of the most volatile assets on earth.
El Salvador’s Use of The Lightning Network
You may have read the news. El Salvador recently became the first country in the world to adopt Bitcoin as legal tender.
A move applauded by most of the Bitcoin community turned out to be nothing more than an authoritarian regime’s grab for unprecedented control.
When El Salvador’s president, Nayib Bukele, showed his support for Bitcoin at the 2021 Miami Bitcoin conference, people were excited and thrilled.
What he didn’t mention was how people would be forced to use Chivo, a fully centralized LN wallet. In a recent tweet, Bukele said “Chivo isn’t a bank” and he’s right. Chivo is 1000x more corrupt, and centralized than any bank on earth.
The government now has full direct control over all of their citizens funds, and can turn their wallets on or off whenever they want. We saw this first hand when on the day they launched they quickly shut down due to “technical difficulties”
We’ve also received dozens of reports across social media of their transactions not going through on the lightning network. Why? Because the LN is only meant for tiny 1–5$ transactions, and nothing over $400.
A centralized network that limits people to spend only $400? Maybe I’m missing something, but how exactly is this a move up from the banks?
Vulnerabilities to Lightning Network
Independent Lightning Network developer Joost Jager has voiced many concerns about the network over the years. He claims while many features they’ve built are great, it does open up for some serious threats.