The FED Released A Study Of The Lightning Network. These Are Their Conclusions | Bitcoinist.com
Bitcoin is the FED’s new most loved subject. Straight from the Federal Reserve Bank of St. Louis measuring expansion in BTC terms, comes the Federal Reserve Bank of Cleveland with a review named “The Lightning Network: Turning Bitcoin into Money.” An exhaustive examination that sadly just “covers the period January 1, 2017, to September 5, 2019,” their decisions are nowhere near astounding.
“We find a significant association between LN adoption and reduced blockchain congestion, suggesting that the LN has helped improve the efficiency of Bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or the adoption of SegWit.”
What’s astonishing here, however, is that the FED is investigating bitcoin’s Lightning Network. What’s more, has positive comments about it. What precisely is happening here? We should check what they found to check whether it gives us any pieces of information.
BTC cost diagram for 07/14/2022 on Timex | Source: BTC/USD on TradingView.com
The FED’s Most Interesting Observations
“We find that adoption of the Lightning Network has led to a reduction in Bitcoin blockchain congestion and lower mining fees.”
Well FED, that is the very level headed. Could the “lower mining fees” influence the venture over the long haul as altcoin enthusiasts love to say? Perhaps in 50 to 100 years. For the present, the excavators’ prizes are guaranteed.
“We find limited evidence that greater centralization of the network is associated with lower fees.”
Good to be aware, FED!
“Recent episodes of high congestion, especially in early 2021, suggest that the LN is not a panacea.”
In this review, every last sentence is obtained… aside from this one. Why would that be, FED?
“Less blockchain congestion may mean lower barriers to arbitrage across cryptocurrency exchanges, thereby improving market liquidity.”
Notice the “may” there, this isn’t ensured. Furthermore, it’s the most un-intriguing thing about The Lightning Network.
“Bertucci studies a strategic model of network formation and shows that competition between nodes prevents the network from becoming highly centralized.”
Take that, altcoiners! Indeed, even the FED knows how horrendous the “The Lightning Network is centralized” contention is. Be that as it may…
“When the network is more centralized, each channel, and each Bitcoin locked into the protocol, is likely to support a higher volume of payments”
Good to be aware, FED. However, no one needs or needs centralization.
Observations About The Bitcoin Network As A Whole
“Total fees attached to payments waiting in the mempool have fallen since 2017, suggesting either lower demand or greater supply of settlement capacity.”
“Generally, fees have fallen in nominal bitcoin terms.”
No further remarks on these ones.
Questionable Observations In The FED’s Study
“By reducing fees, the LN reduces the incentive for Bitcoin miners to use large amounts of computing power, meaning less energy use and positive consequences for the environment.”
The Lightning Network suggests a whole lot lower energy utilization since it doesn’t need mining. In any case, the bitcoin organization and PoW mining is the climate’s dearest companion, as this other concentrate plainly shows.
“While this paper focuses on Bitcoin, the same technology can allow other cryptocurrencies to be widely used, secure, and decentralized.”
Stop it, FED. The bitcoin network is the main decentralized one. Altcoins can be numerous things, however decentralized isn’t one of them.
The Study’s Unsurprising Results
“Our results suggest that the Lightning Network can help Bitcoin achieve greater scalability, allowing it to operate better as a payments system.”
Once once more, that is the very unbiased. Great even the FED concedes that it functions as expected, though.
“An increase in the number of LN channels reduces the mempool count.”
It’s memorable’s great that the two channels and network limit are at a record-breaking high.
“Network centralization does not have a clear effect on the efficiency of the network.”
Good, however no one needs centralization anyway.
“If, during 2017, the LN had existed and been the size it was at the end of our sample, by how much would Bitcoin congestion have been lowered? Our results suggest that the mempool count would have been 93 percent lower, mempool fees 96 percent lower, and the proportion of low fee transactions 197 percent higher.”
Those are promising numbers, no doubt. (However, *)even the FED realizes this.
“Our findings suggest that the off-chain netting benefits of the Lightning Network can help Bitcoin to scale and function better as a means of payment.”
It is. What’s more, the party is simply getting started.
“Data are not available on how Bitcoin is used, so we cannot say for sure whether Bitcoin is being increasingly used as a means of payment.”
Yep, that is the very objective.
“The Lightning Network loosens a key technological constraint by allowing payments to be settled more quickly.”
And that is all there is to it. It’s insane how this FED study and t
he recently broke down blog post come to such unique end results. Are we managing a decent cop/terrible cop circumstance here?
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