{"id":25233,"date":"2016-04-06T15:11:53","date_gmt":"2016-04-06T15:11:53","guid":{"rendered":"http:\/\/ci027cfe66a00c26c3"},"modified":"2016-04-06T15:11:53","modified_gmt":"2016-04-06T15:11:53","slug":"bitcoin-lightning-network-creators-fees-will-be-effectively-zero-1459955513","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/technical\/bitcoin-lightning-network-creators-fees-will-be-effectively-zero-1459955513","title":{"rendered":"Bitcoin Lightning Network Creators: Fees Will Be Effectively Zero"},"content":{"rendered":"
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Roughly two months ago, Lightning Network<\/a> creators Joseph Poon<\/a> and Tadge Dryja visited<\/a> the Coinbase<\/a> offices to explain how their design works and answer some questions from Coinbase employees and executives. After an explanation of why the duo does not believe centralization via supernodes will be an issue on the network, they went into a related aspect of the system: the extremely low fees.<\/p>\n

Dryja and Poon claimed that the high level of competition between Lightning Network hubs will drive down fees on the network to practically zero.<\/p>\n

A Lot of People Think They\u2019ll Make Money<\/strong><\/h2>\n

Many holders of bitcoins are excited for the upcoming release of the Lightning Network on the Bitcoin blockchain because it offers them a chance to earn a return on their digital currency holdings. Having said that, the very fact that many people are looking forward to operating Lightning Network hubs means that there will be a fair amount of competition for routing transactions on the network.<\/p>\n

Dryja explained this phenomenon:<\/p>\n

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\u201cThere\u2019s a lot of people with bitcoin, and they\u2019re like, \u2018Oh. I\u2019m going to run a Lightning node, and I\u2019m going to make so much money\u2019 … The thing is, there\u2019s a lot of people saying that, so there\u2019s going to be a lot of competition.\u201d <\/p>\n<\/blockquote>\n

Dryja also compared operating a Lightning Network hub to Bitcoin mining<\/a>, although he stated the tendencies toward centralization are weaker due to the extremely low barriers to entry. <\/p>\n

\u201cIt sort of feels like mining, but worse,\u201d he said. \u201cThere aren\u2019t even capital costs to get the equipment. All you need is a computer, an Internet connection and bitcoin.\u201d<\/p>\n

Competition Should Drive Down Fees<\/strong><\/h2>\n

When estimating the costs of using the Lightning Network, Poon went as far as to say, \u201cThe fees people are going to charge are going to be effectively near zero. If you really game it out for a lot of payments, one satoshi<\/a> is too high; that\u2019s really what we\u2019re looking at.\u201d<\/p>\n

Some have also hinted that fees on the Lightning Network could be literally zero in certain cases due to the opportunities for collecting data on the network; however, it\u2019s unclear how new privacy features<\/a> could affect this profit model.<\/p>\n

In terms of one\u2019s ability to earn a profit on the Lightning Network, Dryja added, \u201cMaking money off the intermediary routing…it\u2019s really hard. It\u2019s really easy to spin up new nodes.\u201d<\/p>\n

Lightning Can Handle Much Higher On-Chain Fees<\/strong><\/h2>\n

Poon also offered an analogy to the Internet in an effort to explain the low barriers to entry for operating a Lightning Network hub. He explained:<\/p>\n

\n

\u201cIt\u2019s not like the Internet. With the Internet, there\u2019s actual, physical connectivity, and you can extract rent<\/a> from that. With this, it\u2019s a virtual layer on top of that. Basically, it\u2019s a function of the cost of the transaction fees on [the blockchain], which is pretty cheap.\u201d <\/p>\n<\/blockquote>\n

Poon added that fees on the network would still be extremely low in a situation where on-chain transaction<\/a> fees rose to levels 400 times where they are today. He stated:<\/p>\n

\n

\u201cEven if it goes obscene, which ideally it shouldn\u2019t go obscene, but even if it\u2019s something crazy like $20, you\u2019re not going to be able to extract much rent.\u201d <\/p>\n<\/blockquote>\n

Although some individuals who were hoping to earn a serious profit on the Lightning Network are likely to be upset by Dryja and Poon\u2019s comments, the vast majority of the community will still be able to benefit from the scaling<\/a> opportunities presented by this new system for instant Bitcoin micropayments. According to the duo behind the original concept, the Lightning Network will be able to scale Bitcoin to millions (or perhaps billions) of transactions per second.<\/p>\n

Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on <\/em>VICE Motherboard, Business Insider, NASDAQ, RT\u2019s Keiser Report and many other media outlets. You can follow <\/em>@kyletorpey<\/a><\/em>on Twitter.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Roughly two months ago, Lightning Network creators Joseph Poon and Tadge Dryja visited the Coinbase offices to explain how their design works and answer some questions from Coinbase employees and executives. After an explanation of why the duo does not believe centralization via supernodes will be an issue on the network, they went into a […]<\/p>\n","protected":false},"author":3445,"featured_media":25234,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35],"tags":[2052,505,3543,130,3315],"class_list":["post-25233","post","type-post","status-publish","format-standard","has-post-thumbnail","category-technical","tag-costs","tag-fees","tag-joseph-poon","tag-lightning","tag-tadge-dryja"],"author_data":{"id":3445,"name":"Kyle Torpey","nicename":"kyle-torpey","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/kyle-torpey-promo-image-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/bitcoin-lightning-network-creators-fees-will-be-effectively-zero.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/25233","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/3445"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=25233"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/25233\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/25234"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=25233"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=25233"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=25233"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}