Bitcoin Lightning Network transaction fees are close to zero, and transaction throughput can be expanded to millions of times per second

About two months ago, Lightning Network authors Joseph Poon and Tadge Dryja visited Coinbase’s office to explain the design principles of the Lightning Network to Coinbase employees and executives and answer some of their questions. In addition, the two sides also discussed a feature of the Lightning Network: extremely low fees.

Dryja and Poon claim that high competition among Lightning Network hubs will drive network fees down to near zero.

Many people think that the Lightning Network will bring profits

Many Bitcoin holders are looking forward to the upcoming Lightning Network, believing that it will provide them with an opportunity to earn returns on their digital currency holdings. With this said, the large number of people looking forward to the Lightning Network hub also means that there will be a lot of competition for routing transactions on the network.

Dryja explains this phenomenon:

“A lot of people who own Bitcoin are going to say, ‘Oh, I’m going to run a lightning node and I’m going to make a ton of money’ … The point is, there are a lot of people thinking that way, and so there’s a ton of competition.”

Dryja also compared operating a Lightning Network hub to Bitcoin mining, saying that because the barrier to entry to the Lightning Network is extremely low, its tendency toward centralization is weakened.

“It’s like mining, but a lot less profitable,” he said. “All you need is a computer, internet and bitcoin.”

Competition drives down costs

When estimating the cost of using the Lightning Network, Poon went on to say: “The fees that people will charge will be effectively close to zero. If there are a lot of people using the Lightning Network to make payments, then a transaction fee of 1 satoshi (the smallest unit of Bitcoin) will be too high, and that’s what we’re looking for.”

Some have also suggested that in some cases, Lightning Network fees could be effectively zero because it provides the opportunity to collect data about the network, however, it is unclear how privacy features would impact this profit model.

Dryja added, “It’s really hard to make money with intermediary routing because it’s so easy to spin up new nodes.”

Mr Poon added that even if on-chain transaction fees were to increase 400 times what they are today, Lightning Network fees would still be very low.

While some are hoping to cash in on the Lightning Network, Dryja and Poon’s comments are likely to disappoint them, as the majority of the community stands to benefit from the new system, which, according to its original conception, could scale bitcoin’s transaction throughput to millions (or billions) of transactions per second.

Original article: https://bitcoinmagazine.com/articles/bitcoin-lightning-network-creators-fees-will-be-effectively-zero-1459955513
By Kyle Torpey
Translation: Overnight porridge
Source (translation): Babbitt Information (http://www.8btc.com/bitcoin-lightning-network)