The Lightning Network has been touted by many Bitcoin Core contributors as a key way to scale the Bitcoin network to many more new users in the coming years. The basic idea is to implement a caching layer on top of the base Bitcoin blockchain that will allow users to transact with each other without the need to broadcast each individual transaction for everyone to see and miners to confirm.
While the bitcoin development community is generally excited about layer-two solutions like the Lightning Network, bitcoin miners are not completely sold on the idea because some of them view it as a potential loss of revenue over the long term. The theory is that miners will be missing out on transaction fees if payments are processed by Lightning Network nodes rather than miners on the blockchain.
While miners are undecided on the Lightning Network, some of them have already started mining RSK, which is an Ethereum-esque sidechain to Bitcoin that is, according to BraveNewCoin, planned to go live on the Bitcoin mainnet in June. Transaction fees are paid to bitcoin miners on this sidechain, which may make it a more attractive solution for micropayments than the Lightning Network, at least from a miner’s perspective.
Some Miners Aren’t Sure if Lightning Network is Good for Them
The lack of support for Segregated Witness (SegWit) – or even other solutions that don’t involve the Lightning Network – among miners was explained by Giga Watt CEO Dave Carlson in a recent interview with Bitcoin Magazine. “The reason [SegWit] (and all other solutions) [hasn’t] been taken is simple – miners don’t see how they are going to make more money,” said the longtime bitcoin miner. “If you show miners a way to scale the network that also gives them a financial incentive, you’ll have consensus in no time.”
Additionally, Jihan Wu, who is a co-CEO at Bitmain, recently shared an 8btc article (written by someone else) on Weibo where concerns about the effect the Lightning Network could have on miner revenue were explored.
The bitcoin-denominated value of transaction fees collected by miners have skyrocketed over the past month, and the effect that increasing the block size limit via SegWit, which also allows for a more efficient version of the Lightning Network to exist, would have on these increased profits is unclear.
All of the major Lightning Network implementations currently rely on the adoption of SegWit by the Bitcoin network, which 95 percent of miners must signal for in order for it to activate (at least in the current deployment method). At this time, roughly 30 percent of the network hashrate has signaled support for SegWit.
Blockstream’s Alex Bergeron responded to miners’ concerns with a Medium post in which he outlined the reasons miners could potentially earn more income if the Lightning Network were to become a popular option for payments among users. Berergon pointed out intra-platform transactions (such as those between Xapo users) and microtransactions as two specific examples where miners traditionally did not earn any revenue. “These transactions are potential revenues which the miners are never going to be able to tap into under the current technological context,” wrote Bergeron.
Couldn’t Miners Run Lightning Network Nodes?
Some have wondered whether it would make sense for miners to run Lightning Network nodes in addition to their normal mining software.
During a recent talk in Singapore, Mastering Bitcoin author Andreas Antonopoulos made the point that the Lightning Network may incentivize more bitcoin holders to run full nodes in general. However, he also discussed reasons as to why miners may not be interested in running Lightning Network nodes.
“You would think that a group of miners that run nodes that already collect all transactions [and] already have to be fully validating nodes would look at the Lightning Network and [say], ‘Hey, we could earn more fees using the same infrastructure by running lightning nodes. We could be hubs for payments; we could extend into this space,’” noted Antonopoulos. “Why are they not doing that? Because the Lightning Network and running full nodes is software, and it requires maintenance, system administrators, security professionals, configuration, upgrades, and all of the kinds of things that you can’t simply get someone to rack and mount hardware to do. It’s an alien world. It’s not better; it’s not worse. It’s just on the other side of that culture divide.”
Antonopoulos’s entire talk was about the cultural divide between those who work on hardware and those who work on software.
Will Users Be Pushed to RSK for Smaller Payments?
RSK’s Gabriel Kurman recently told BraveNewCoin that Bitcoin India (a bitcoin mining pool) is already mining on RSK’s private testnet and other bitcoin mining pools are preparing to do the same. In fact, the aforementioned Bitmain is an investor in RSK
It’s possible that miners would prefer to see transactions processed on the RSK sidechain rather than the Lightning Network. After all, miners earn fees for transactions that are processed on the sidechain directly.
Having said that, a variation of the Lightning Network would also likely be found on the RSK sidechain eventually. In the same interview with BraveNewCoin, Kurman noted that RSK allows 2,000 transactions per second on chain via the Lumino compression protocol; however, he also noted RSK will allow up to 20,000 transactions per second off chain through a system similar to the Lightning Network.
Image adapted from Pixabay.