Roughly two months ago, Lightning Network creators Joseph Poon and Tadge Dryja visited the Coinbase offices to explain how their design works and answer some questions from Coinbase employees and executives. After an explanation of why the duo does not believe centralization via supernodes will be an issue on the network, they went into a related aspect of the system: the extremely low fees.
Dryja and Poon claimed that the high level of competition between Lightning Network hubs will drive down fees on the network to practically zero.
A Lot of People Think They’ll Make Money
Many holders of bitcoins are excited for the upcoming release of the Lightning Network on the Bitcoin blockchain because it offers them a chance to earn a return on their digital currency holdings. Having said that, the very fact that many people are looking forward to operating Lightning Network hubs means that there will be a fair amount of competition for routing transactions on the network.
Dryja explained this phenomenon: “There’s a lot of people with bitcoin, and they’re like, ‘Oh. I’m going to run a Lightning node, and I’m going to make so much money’ … The thing is, there’s a lot of people saying that, so there’s going to be a lot of competition.” Dryja also compared operating a Lightning Network hub to Bitcoin mining, although he stated the tendencies toward centralization are weaker due to the extremely low barriers to entry.
“It sort of feels like mining, but worse,” he said. “There aren’t even capital costs to get the equipment. All you need is a computer, an Internet connection and bitcoin.”
Competition Should Drive Down Fees
When estimating the costs of using the Lightning Network, Poon went as far as to say, “The fees people are going to charge are going to be […]
