Wu Jihan and Jiang Zhuoer criticize the "Lightning Network" and the conflict of interests between the blockchain and mining circles

Yesterday, media reported that Peter Todd, one of the core developers of Bitcoin, criticized the Lightning Network in a tweet, pointing out that a large number of memory segment errors (segfaults, also known as "access rights conflicts") occurred when the Lightning Network was running on the test network; he believed that it was not a "good idea" to use the C programming language for the Lightning Network. He predicted that the Lightning Protocol would be vulnerable to DoS attacks in its current version, both at the P2P level and at the blockchain level.

Prior to this, the Lightning Network was a Bitcoin transaction acceleration solution promoted by Peter Todd based on the authorization of Thaddeus Dryja and Joseph Poon.

1. Jiang Zhuoer criticizes Lightning Network again

After Peter Todd’s tweet, BTC.TOP CEO Jiang Zhuoer commented on Weibo that “Even Peter Todd has lost confidence. It seems that the Lightning Network will need another 18 months. However, the biggest problem of the Lightning Network is not in technology, but in business.

Payment networks need economies of scale to attract people. Alipay is more valuable than 99Bill, not because of its superior technology, but because of its greater economies of scale. Alibaba and Tencent have spent tens of billions of real money to achieve economies of scale with a negative 10 yuan handling fee per transaction. Core actually wants to achieve economies of scale with a handling fee of xx yuan per transaction?

When transactions are not congested, no one needs to use Lightning. When transactions are congested, you need to use it. But the problem is that when no one uses Lightning, even if someone transfers your coins on the Lightning Network, you have to withdraw them to the main network before you can use them. However! Lightning withdrawal to the main network = a main network transaction = very expensive handling fees [smiles and says nothing]

If someone wants to transfer your coins on the Lightning Network, but no one accepts Lightning coins and the withdrawal fee is expensive, will you accept it? For example, if Alipay charges a 30 yuan fee for deposits and withdrawals (instead of a 10 yuan discount for each transaction), do you think Alipay can be promoted? Can a network effect be formed? "

Later, Bitmain's Wu Jihan reposted the comment and said: Lightning Network technology is relatively complex, but if it is successfully developed, it will still be very useful. We should be patient and persist a little longer, and maybe we will succeed.

This is not the first time that Jiang Zhuoer has commented on the Lightning Network on Weibo, nor is it the first time that he has raised the view that the biggest problem with the Lightning Network is not the technology but the business. At the end of 2017, Jiang Zhuoer published a long Weibo post titled "The Truth about the Lightning Network" and listed 13 personal comments on the Lightning Network. To this day, this Weibo post has been pinned on Jiang Zhuoer's personal Weibo homepage.

2. The truth about Lightning Network?

Below is Jiang Zhuoer’s original article “The Truth about Lightning Network”:

1. Driven by the economic and scale effects, the Lightning Network will inevitably have a "Lightning Network Hub" similar to "Alipay/WeChat".

2. When the main chain is available, the Lightning Network is a beneficial supplement to the main chain. When the main chain is locked by Blockstream-Core at 1M, it can only accommodate large settlement transactions of the Lightning Network, but not user transactions, and the "Lightning Network Hub" = the bank that controls all Bitcoin transactions.

3. The expansionists never require all transactions to go through the main chain, but only require moderate expansion within the network's tolerance (for example, the network can now withstand 20M blocks) to ensure that users have the right to use the main chain. Otherwise, users must go through the side chain, must rely on a third party, and must trade through an intermediary, which completely violates Satoshi Nakamoto's design.

4. "Bitcoin White Paper: A Peer-to-Peer Electronic Cash System" [Peer-to-Peer] users do not rely on a third party to conduct transactions (ensuring that users are not controlled by financial institutions); [Cash] can be used like cash, but both are gone today.

5. Peer-to-peer Bitcoin wants to get rid of the control of financial institutions, but financial institutions control Bitcoin by holding a controlling stake in Blockstream and controlling the Core development team (Core core members are shareholders or employees of Blockstream). They lock the main chain block 1M, drive transactions to the Lightning Network, and then control the "Lightning Network Hub", and the familiar banking gameplay is back.

6. Banks no longer have to think about how to deal with Bitcoin, because Bitcoin has become a new banking system. For banks, it is just another ordinary foreign currency. In the past, Bitcoin did not need a middleman, on-chain transactions did not need fraud prevention, did not need government supervision, transactions were fast, and did not require high fees. Now everything has changed, Bitcoin has been destroyed, and different concepts have led to the outbreak of the Civil War over Bitcoin.

7. Just like North Korea split into North Korea and South Korea, Bitcoin split into two communities during the Civil War: BCE (Bitcoin Core, a Bitcoin branch led by the Core development team) and BCH (Bitcoin Cash, a Bitcoin branch that follows Satoshi Nakamoto's design and intentions). Just like South Korea surpassed North Korea, BCH will surpass BCE in 2-3 years.

8. Many people understand these principles, but they believe that Core has a huge advantage in ruling (it has successfully kicked out a number of heavyweights including Gavin, the designated successor of Satoshi Nakamoto, and the little prodigy of ETH founder), and no one can overturn this $100 billion system. It doesn't matter, the market will prove everything.

9. The original spirit of Bitcoin is freedom, rationality, and the market, not the ruling authority of the development team, speech control, and political means. SW has been proven to be unused, and the Lightning Network will be the same. The Core Party, who are good at playing political means, will react first: You (the entire market?) deliberately boycott SW and the Lightning Network, hehe~~

Why is the entire market "against Core"? Not for political reasons, but for market reasons: neither SW nor the Lightning Network has a network scale effect.

10. Tencent and Alibaba burned tens of billions of real money and spent several years promoting mobile payments to establish the network scale effect. How many billions and how long will Blockstream-Core spend to promote the Lightning Network? However, BCE has no time. [O Web Link] The kingdom that BCE built step by step from dark web transactions is being occupied by BCH at an accelerated pace.

11. Slandering the miners for expanding the capacity in order to collect more fees is the most ridiculous conspiracy theory. If they want to collect more fees, they should not expand the capacity, and let users fight like dogs for 1M space, and fight each other with fees until they are bloody. Selling mineral water to 100 people can only make 100 yuan, but maliciously making one person thirsty, even if the mineral water is sold for 10,000 yuan, it is not difficult.

12. Now on BCE, miners receive a transaction fee of 50M blocks (0.005 coins/KB, 50 times the standard transaction fee of 0.0001 coins/KB). This is an extremely high transaction fee that cannot be received even after 15 years. Miners are very satisfied and strongly support Blockstream-Core to continue locking 1M blocks on the BCE chain.

13. @LightningHSL has a statement that I agree with:

The miners who once fought on the front line to popularize Bitcoin to a wider audience and were criticized by a group of idiots have finally given up seeking benefits for BCE users and are now fighting for BCH to change the world.

Small block enthusiasts are still continuing to sing the value storage route, continue to criticize those who speak out for expansion, and are still fantasizing about segregated witness, lightning network and side chains.

Only BCE users are crying, paying the high BCE transaction fees in exchange for their hard-earned money.

3. Behind Jiang Zhuoer’s criticism of the Lightning Network, the dispute between the blockchain and mining circles

In Jiang Zhuoer's article "The Truth of Lightning Network", the dispute between BCE (Bitcoin Core, a Bitcoin branch led by the Core development team) and BCH (Bitcoin Cash) was mentioned, and in Article 9, it was pointed out that why the entire market is "against Core"? It is not a political reason, but a market reason: neither SW nor the Lightning Network has a network scale effect.

The dispute between BCE and BCH, this is the key point!

SW is the initials of Segregated Witness, a Bitcoin scalability solution proposed by Pieter Wuille, one of the maintainers of Bitcoin Core, in Hong Kong in December 2015. Its essence is to add a mounting channel for Bitcoin outside the chain without changing the capacity of the Bitcoin main chain. We can think of SW as an additional hanging basket on the transport vehicle. With SW, many "gifts" of Bitcoin users do not need to be carried with them, but can be directly stored in the hanging basket to reduce the space volume, so that more people can be carried inside the transport vehicle to the destination, thereby improving the efficiency of transportation (transaction).

Lightning Network is another transaction mechanism that improves the efficiency of Bitcoin transmission. We can think of it as a multi-centralized transaction system. In the Lightning Network, multiple central points can be compared to different bank branches (the analogy may not be accurate), playing the role of intermediaries. When users conduct transactions at the same central point (the same bank), there is no need for actual capital flow. The central point only needs to change the numbers on the user's account. Only when the user conducts cross-chain transactions, a real transaction is generated. The Lightning Network actually uses the central network to aggregate multiple small and micro transactions, and finally packages them into large transactions, and then trades with the main chain, thereby reducing the transaction load of the main chain.

Therefore, Jiang Zhuoer pointed out in “The Truth about the Lightning Network” that when the main chain is locked by Blockstream-Core at 1M and can only accommodate large settlement transactions of the Lightning Network but not user transactions, the “Lightning Network Hub” = the bank that controls all Bitcoin transactions.

Jiang Zhuoer's statement is both right and wrong. The wrong part is that the Lightning Network is an open source system that any individual or organization can use to build their own network. Secondly, the Lightning Network is not a mandatory network. In addition to it, users can also choose other cross-chain transaction methods.

Jiang Zhuoer criticized that he was afraid that Blockstream Core, which holds the standards of the Lightning Network, would be the last one to dominate. But in fact, Jiang Zhuoer's worry may be unnecessary. As he said, the biggest problem of the Lightning Network is not in technology, but in business, that is, in scale effect. In terms of the current number of users of the Lightning Network, it is indeed a bit premature to worry.

Of course, the reason why Jiang Zhuoer criticized SW and Lightning Network is not just to tell everyone that Lightning Network is a product of decentralization, but more importantly to protect his own interests.

As a miner, Jiang Zhuoer’s wealth accumulation is inseparable from Bitcoin mining. For Jiang Zhuoer, the expansion of blockchain and mining algorithms are the basis for maintaining his own interests. The reason is that Wu Jihan + Jiang Zhuoer + N mining farm owners can obtain 51% of the computing power control of POW mining sources. As for SW and Lightning Network, what benefits do they bring to mining?

Therefore, we should not just look at the surface of Jiang Zhuoer's criticism of the Lightning Network. Behind it is a conflict of interests between the blockchain and mining circles. Blockstream is fighting for the right to charge tolls from users, while Jiang Zhuoer, Wu Jihan and others are fighting to maintain the computing power advantage and control over Bitcoin and PoW-type digital currencies.