Nick Szabo: Bitcoin blockchain alone cannot compete with Visa, needs the help of Lightning Network

Smart contracts and digital currency pioneer Nick Szabo has expressed his views on the blockchain scaling debate, saying that blockchain itself cannot handle the huge number of credit card network transactions.

Saab: "Need" peripheral network

In his recent blog post, Szabo brilliantly described how the Bitcoin blockchain can maintain its core unique selling point: censorship resistance ; or what he calls “automated integrity.”

He wrote:

“Sacrificing performance to achieve the security required for independent, seamless global and automated integrity means that Bitcoin itself cannot possibly match the volume of transactions processed per second by Visa, nor maintain the automated integrity that creates its unique advantage over the legacy financial system.”

It seems that the best compromise to solve this problem is to implement the Lightning Network or a similar protocol to handle smaller transactions and then synchronize these transactions with the Bitcoin network to ensure the authenticity of the transactions.

Saab also said:

“Instead, a trust-minimized peripheral payment network (perhaps the Lightning Network) would need to be used to handle a much larger number of small bitcoin transactions than the bitcoin blockchain, which regularly settles a few large peripheral network transactions.”

What Visa can do, “there is nothing Bitcoin can’t do”

In recent months, several prominent bitcoin commentators have weighed in on the bitcoin blockchain scaling debate, including Tuur Demeester and Andreas Antonopoulos.

Speaking about how the Lightning Network can be used to conduct stable small transactions, Szabo said that for those who use Bitcoin as a currency, "there is nothing impossible" that Visa, MasterCard and other credit card networks can currently do, except that Bitcoin fees are much lower.

“…there are equally good ways to do small peripheral bitcoin retail payments off-chain, where these blockchain transactions only need to be periodically batched and settled on the Capital-B bitcoin blockchain. As bitcoin grows, this blockchain will become a settlement layer for high-value transactions, and we will see peripheral networks being used for small bitcoin retail transactions.”

For example, progress has already been made on this front with the Yours Network, which is working on a type of small bitcoin payment channel inspired by the Lightning Network.

Is Segregated Witness a good thing for Litecoin?

The inability of the Bitcoin community to reach consensus began to cause similar problems for Litecoin.

On January 28, 2017, Litecoin announced an upgrade to Segregated Witness technology, but the community responded coldly and seemed to be stuck in a swamp, reminiscent of Bitcoin’s situation in the past year.

Litecoin founder Charlie Lee said on Reddit, “It’s a shame that SegWit has become a political issue in Litecoin as well.”

Antonopoulos also expressed support for Segregated Witness (SegWit) to solve Bitcoin’s scaling problem, which is a prerequisite for the implementation of the Lightning Network.