The Lightning Network Doesn’t Fix Everything Wrong With Bitcoin

The Bitcoin layer 2 protocol, the Lightning Network, is aptly named because, when it works, it works lightning fast. People love the Lightning Network.

This is an excerpt from The Node newsletter, a daily roundup of the most pivotal crypto news on CoinDesk and beyond. You can subscribe to get the full newsletter here.

Transaction fees too high? Lightning Network.

Blocks too small? Lightning Network.

Blocks too slow? Lightning Network.

Governments censoring transactions? Lightning Network.

Soup too hot? Lightning Network.

Soup too cold? Lightning Network.

With bitcoin fees skyrocketing amid the recent Ordinals and BRC-20 craze, which so luckily lined up perfectly with the annual bitcoin pilgrimage to Bitcoin Magazine’s Bitcoin 2023 conference in Miami, the same answer found its way into conversations about some of Bitcoin’s problems on- and off-stage and on social media again and again.

Which is to say, but say it softly: Maybe the Lightning Network isn’t the way Bitcoin can enable fast, cheap, casual, peer-to-peer transactions.

There’s also a group of people who do and don’t want layers built on Bitcoin at all and think the base layer should ossify or stop changing.

Putting that aside for now, there’s a growing pragmatic view that the Lightning Network is or probably will be good for certain types of payments, but not all types of payments. That doesn’t mean either side is completely correct, but at least the hivemind doesn’t appear to be in control anymore.

The Lightning Network very much was and still is an experimental technology. Proponents warn to this day to exercise caution when committing hard-earned bitcoin to the Lightning Network since you can easily lose funds if you aren’t experienced. And even then, a lot of the more popular Lightning-enabled wallets, like Wallet of Satoshi, work really well mostly because they are custodial.

They may be right. In the future, when many people are using bitcoin, it will be theoretically cheaper to use the Lightning Network for everyday transactions which necessarily makes it more accessible, especially as wealth distribution varies so much across countries.

But the idea that Bitcoin can scale to billions isn’t taken for granted these days, and some see it as an outrageous proposition. More people using bitcoin could be a problem. Nobody knows if the Lightning Network will continue to be cheap if transaction fees start to rise.

There are no panaceas. Not the Lightning Network, not Stratum V2, not your favorite Bitcoin thing.

The end of investing every hope and dream in one Bitcoin spinoff is a good thing. Investing in false gods never works.

Bitcoin is decentralized and, so, it requires decentralized diversity of thought. It’s okay to champion the Lightning Network or Liquid or Ark or whatever your other thing might be. But there’s always a new project to come on Bitcoin, because it’s open-source, and that’s a good thing.