Author Topic: What do you think of adding a low% of crypto allocation  (Read 347664 times)

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2300 on: January 10, 2025, 07:29:44 AM »
I think I get it.  You feel that access only by venture capitalists is unfair, but access only to a few crypto-libertarians in an obscure corner of the internet is fair . . . even though they both result in effectively the same outcome (a large concentration of the cryptocurrency in the hands of a few before the crypto catches on).

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2301 on: January 10, 2025, 07:52:20 AM »
All else being equal, litecoin should operate faster than bitcoin to write blocks due to the hashing differences between the two.  If used as a currency, I'd say that this makes it more suitable.  You're free to argue otherwise of course.

What does Litecoin's use of scrypt hashing and Bitcoin's use of SHA-256 have anything to do with transaction speed? Please elaborate.

You going to answer this one?

I think I get it.  You feel that access only by venture capitalists is unfair, but access only to a few crypto-libertarians in an obscure corner of the internet is fair . . . even though they both result in effectively the same outcome (a large concentration of the cryptocurrency in the hands of a few before the crypto catches on).

Fair and unfair things can have the same outcome. I would still always prefer fair over unfair practices. You say "obscure corner of the internet", but it was precisely the corner of the internet that has interest in and pursues that subject matter. If in 2008 the bitcoin whitepaper were instead published widely across all social media platforms, it still would've only been taken notice by an obscure niche population in the world. The very same population that took notice in mailing list and message boards in 2009. And you people would still be crying about "unfairness" today.

I'll ask you, in 2008, how else would you have gone about bootstrapping something like bitcoin? What is your idea of "fairness". For all the crying about it being unfair, what exactly would you have changed?

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2302 on: January 10, 2025, 08:32:28 AM »
All else being equal, litecoin should operate faster than bitcoin to write blocks due to the hashing differences between the two.  If used as a currency, I'd say that this makes it more suitable.  You're free to argue otherwise of course.

What does Litecoin's use of scrypt hashing and Bitcoin's use of SHA-256 have anything to do with transaction speed? Please elaborate.

You going to answer this one?

Sure.

I said that the hashing differences* between bitcoin and litecoin allow litecoin to write blocks faster (based on 2.5 minutes per block for litecoin vs 10 minutes on average for bitcoin).  Ultimately, the goal as I understand it when using a crypto currency as currency is to complete the transaction and write the results to the blockchain.  It seems to me that the ability to more quickly write transactions to the blockchain possible with litecoin make it a more usable currency than bitcoin.

*Closer examination seems to indicate that this isn't because of hashing differences but block size.  Potayto, potahto.



I'll ask you, in 2008, how else would you have gone about bootstrapping something like bitcoin? What is your idea of "fairness". For all the crying about it being unfair, what exactly would you have changed?

Important to note, you were the one crying about 'unfair' - not me.  I was merely trying to understand the logical consistency behind your claims.

Bitcoin and crypto as a whole are stupid, wasteful ideas.  I wouldn't bootstrap them at all because they're fundamentally bad for humanity and bootstrapping them is morally dubious at best.  They seem to be targeted at solving mostly non-existent problems by creating larger, existential problems.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2303 on: January 10, 2025, 09:13:17 AM »
All else being equal, litecoin should operate faster than bitcoin to write blocks due to the hashing differences between the two.  If used as a currency, I'd say that this makes it more suitable.  You're free to argue otherwise of course.

What does Litecoin's use of scrypt hashing and Bitcoin's use of SHA-256 have anything to do with transaction speed? Please elaborate.

You going to answer this one?

Sure.

I said that the hashing differences* between bitcoin and litecoin allow litecoin to write blocks faster (based on 2.5 minutes per block for litecoin vs 10 minutes on average for bitcoin).  Ultimately, the goal as I understand it when using a crypto currency as currency is to complete the transaction and write the results to the blockchain.  It seems to me that the ability to more quickly write transactions to the blockchain possible with litecoin make it a more usable currency than bitcoin.

*Closer examination seems to indicate that this isn't because of hashing differences but block size.  Potayto, potahto.

This tells me you often speak beyond your understanding of the subject matter. I would love for you to expand upon this so I could rebuttal more, but I fail to understand why you think it is of much better use as a currency. What reasoning do you have for this? (Please for the love of god don't say its blockspeed of 2.5 minutes).

If you read my original post, I said don't refer to the blockspeed as your reasoning. I knew this would be your response as it is a typical response from people that don't understand how these things work from a technical perspective and is a common misconception that "block speed" equals faster transaction settling.

And you say "potayto, potahto", but we're talking about technical things and words matter and have meaning. If you're going to speak to these things then it is important to get the terminology right, otherwise leave it to the experts.

Both litecoin and bitcoin use similar signature schemes based on ECDSA which means transaction sizes are largely similar between the two for similar transaction types. Since transactions are just data and both networks are broadcast networks, it means that scaling that data across the internet for a global base of users in a decentralized fashion presents that same scaling issues for both. The frequency at which blocks are confirmed is an arbitrary number. Yes, the difficulty adjustment for litecoin means that blocks are created at an average time of 2.5 minute, that doesn't change the fundamental problem of say 2 billion people needing to send 4 transactions every day. That would result in almost 400 terabytes of data needing to propagate around the world every single day and be stored by every single node that is a part of the bitcoin or litecoin network. It is the same problem. If that were the case, then nodes would be run in only the largest data centers with the fastest internet pipes and the most storage capabilities. Suddenly the network isn't so centralized. This is why scaling either blockchain requires secondary layers. Both networks have lightning network capability as a secondary network which takes transaction settlement off-chain and thus allows for instant settlement. Therefore they're both equally as useful as a currency, but given the fact that the lightning network on the litecoin blockchain is a glorified testnet while the lightning network on Bitcoin has actual adoption and an economy taking place on it, you could argue that bitcoin is actually better used and more capable as a currency today. The only reason why you may be able to have a transaction confirm on the litecoin network today for a cheaper fee is simply because nobody actually uses it. The same would be true in reverse if Litecoin were in Bitcoin's place today and Bitcoin was where litecoin is in terms of adoption today.



I'll ask you, in 2008, how else would you have gone about bootstrapping something like bitcoin? What is your idea of "fairness". For all the crying about it being unfair, what exactly would you have changed?

Important to note, you were the one crying about 'unfair' - not me.  I was merely trying to understand the logical consistency behind your claims.

Bitcoin and crypto as a whole are stupid, wasteful ideas.  I wouldn't bootstrap them at all because they're fundamentally bad for humanity and bootstrapping them is morally dubious at best.  They seem to be targeted at solving mostly non-existent problems by creating larger, existential problems.
[/quote]

FWIW - I'd argue that litecoin had a more fair launch than bitcoin - no ninja mining or pre-mining.  (It's also much better in use as an actual currency.)

I wasn't crying about "unfair" anything. You asked me what the difference between bitcoin and the others are and I simply noted the difference in how it was bootstrapped. You may not have complained about the fairness of anything either, but you certainly argued it.

Now, when asked about what you'd change to make it any more fair you come back and simply state bitcoin is stupid.

Arguing with you is like arguing with a rock.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2304 on: January 10, 2025, 12:25:32 PM »
If you read my original post, I said don't refer to the blockspeed as your reasoning. I knew this would be your response as it is a typical response from people that don't understand how these things work from a technical perspective and is a common misconception that "block speed" equals faster transaction settling.

And you say "potayto, potahto", but we're talking about technical things and words matter and have meaning. If you're going to speak to these things then it is important to get the terminology right, otherwise leave it to the experts.

Both litecoin and bitcoin use similar signature schemes based on ECDSA which means transaction sizes are largely similar between the two for similar transaction types. Since transactions are just data and both networks are broadcast networks, it means that scaling that data across the internet for a global base of users in a decentralized fashion presents that same scaling issues for both. The frequency at which blocks are confirmed is an arbitrary number. Yes, the difficulty adjustment for litecoin means that blocks are created at an average time of 2.5 minute, that doesn't change the fundamental problem of say 2 billion people needing to send 4 transactions every day. That would result in almost 400 terabytes of data needing to propagate around the world every single day and be stored by every single node that is a part of the bitcoin or litecoin network. It is the same problem. If that were the case, then nodes would be run in only the largest data centers with the fastest internet pipes and the most storage capabilities. Suddenly the network isn't so centralized. This is why scaling either blockchain requires secondary layers. Both networks have lightning network capability as a secondary network which takes transaction settlement off-chain and thus allows for instant settlement. Therefore they're both equally as useful as a currency, but given the fact that the lightning network on the litecoin blockchain is a glorified testnet while the lightning network on Bitcoin has actual adoption and an economy taking place on it, you could argue that bitcoin is actually better used and more capable as a currency today. The only reason why you may be able to have a transaction confirm on the litecoin network today for a cheaper fee is simply because nobody actually uses it. The same would be true in reverse if Litecoin were in Bitcoin's place today and Bitcoin was where litecoin is in terms of adoption today.

Hold up.  Now you're changing the game.

You're assuming that use of the lightning network is an acceptable solution to the failure of scalability of Bitcoin and Bitcoin based crypto.  The lightning network is by design less secure than Bitcoin because it performs transactions off the blockchain.  In practice, the lightning network is also much more centralized [https://www.sciencedirect.com/science/article/pii/S0308596123002070, https://essay.utwente.nl/92624/1/Bachelor_Thesis.pdf].  It also faces it's own problems of scalability that render it a poor solution were the world to actually try to use bitcoin as a payment method [https://www.truthcoin.info/blog/lightning-limitations/].

So instead of changing the question to jump up with a 'gotcha!', let's assume that this less secure, more centralized, and scalability limited method of payment is not a valid solution.  A smaller block size and faster confirmation time is more likely to be useful when using a cryptocurrency for payment without resorting to subversion of most of the selling points of crypto.

But hey, what do I know.  Like you said, let's check what the experts say:
"Litecoin transactions are confirmed approximately every 2.5 minutes, making them four times faster than Bitcoin. This transaction speed allows for quicker confirmation times and makes Litecoin more practical for everyday use." - https://cryptomus.com/blog/bitcoin-vs-litecoin-a-complete-comprasion?srsltid=AfmBOorHXOcgDt0BUAPT3hJkCI9kj5bjTrNHaMyjHjwrUd2MrWqIWK14
"Litecoin's block interval is four times shorter than Bitcoin's, at 2.5 minutes. As a result, transactions proceed more quickly and the network can handle more transactions" - https://simpleswap.io/blog/bitcoin-vs-litecoin
"Litecoin vs Bitcoin Transaction Speed
- Litecoin processes transactions much faster than bitcoin.
- It takes about 2.5 minutes to confirm.
- Bitcoin takes about 10 minutes to confirm.
- This speed makes Litecoin ideal for everyday transactions.
- As of August 2024, Litecoin is processing around 35,000 transactions per day."
- https://ecos.am/en/blog/the-complete-guide-to-litecoin-understanding-using-and-investing/?srsltid=AfmBOooQ9p6uaOGLjvWzNng2UDuJEyrOKCkTq6efbEhyZ9wRoJ93dxqF
"Faster Block Time: Litecoin has a block time of 2.5 minutes, compared to Bitcoin’s 10 minutes, which allows for quicker transaction confirmations." - https://komodoplatform.com/en/academy/bitcoin-cash-vs-litecoin/
"Litecoin has a faster transaction processing time than Bitcoin." - https://www.investopedia.com/articles/investing/040515/what-litecoin-and-how-does-it-work.asp
"While Bitcoin is the most popular and highly valued cryptocurrency, Litecoin offers faster transaction confirmation times due to its 2.5-minute block generation time (compared to 10 minutes for Bitcoin)." - https://www.moonpay.com/learn/bitcoin/litecoin-vs-bitcoin

Which experts are you following to come to your conclusion that bitcoin transaction settling occurs at the same speed as LTC?  Can you post the links?






There is a lack of fairness in how many of these alt-coins come into existence.

I wasn't crying about "unfair" anything.

?

Your complaint about unfairness above literally kicked off this whole thread of conversation.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2305 on: January 10, 2025, 01:32:24 PM »
If you read my original post, I said don't refer to the blockspeed as your reasoning. I knew this would be your response as it is a typical response from people that don't understand how these things work from a technical perspective and is a common misconception that "block speed" equals faster transaction settling.

And you say "potayto, potahto", but we're talking about technical things and words matter and have meaning. If you're going to speak to these things then it is important to get the terminology right, otherwise leave it to the experts.

Both litecoin and bitcoin use similar signature schemes based on ECDSA which means transaction sizes are largely similar between the two for similar transaction types. Since transactions are just data and both networks are broadcast networks, it means that scaling that data across the internet for a global base of users in a decentralized fashion presents that same scaling issues for both. The frequency at which blocks are confirmed is an arbitrary number. Yes, the difficulty adjustment for litecoin means that blocks are created at an average time of 2.5 minute, that doesn't change the fundamental problem of say 2 billion people needing to send 4 transactions every day. That would result in almost 400 terabytes of data needing to propagate around the world every single day and be stored by every single node that is a part of the bitcoin or litecoin network. It is the same problem. If that were the case, then nodes would be run in only the largest data centers with the fastest internet pipes and the most storage capabilities. Suddenly the network isn't so centralized. This is why scaling either blockchain requires secondary layers. Both networks have lightning network capability as a secondary network which takes transaction settlement off-chain and thus allows for instant settlement. Therefore they're both equally as useful as a currency, but given the fact that the lightning network on the litecoin blockchain is a glorified testnet while the lightning network on Bitcoin has actual adoption and an economy taking place on it, you could argue that bitcoin is actually better used and more capable as a currency today. The only reason why you may be able to have a transaction confirm on the litecoin network today for a cheaper fee is simply because nobody actually uses it. The same would be true in reverse if Litecoin were in Bitcoin's place today and Bitcoin was where litecoin is in terms of adoption today.

Hold up.  Now you're changing the game.

You're assuming that use of the lightning network is an acceptable solution to the failure of scalability of Bitcoin and Bitcoin based crypto.  The lightning network is by design less secure than Bitcoin because it performs transactions off the blockchain.  In practice, the lightning network is also much more centralized [https://www.sciencedirect.com/science/article/pii/S0308596123002070, https://essay.utwente.nl/92624/1/Bachelor_Thesis.pdf].  It also faces it's own problems of scalability that render it a poor solution were the world to actually try to use bitcoin as a payment method [https://www.truthcoin.info/blog/lightning-limitations/].

So instead of changing the question to jump up with a 'gotcha!', let's assume that this less secure, more centralized, and scalability limited method of payment is not a valid solution.  A smaller block size and faster confirmation time is more likely to be useful when using a cryptocurrency for payment without resorting to subversion of most of the selling points of crypto.

But hey, what do I know.  Like you said, let's check what the experts say:
"Litecoin transactions are confirmed approximately every 2.5 minutes, making them four times faster than Bitcoin. This transaction speed allows for quicker confirmation times and makes Litecoin more practical for everyday use." - https://cryptomus.com/blog/bitcoin-vs-litecoin-a-complete-comprasion?srsltid=AfmBOorHXOcgDt0BUAPT3hJkCI9kj5bjTrNHaMyjHjwrUd2MrWqIWK14
"Litecoin's block interval is four times shorter than Bitcoin's, at 2.5 minutes. As a result, transactions proceed more quickly and the network can handle more transactions" - https://simpleswap.io/blog/bitcoin-vs-litecoin
"Litecoin vs Bitcoin Transaction Speed
- Litecoin processes transactions much faster than bitcoin.
- It takes about 2.5 minutes to confirm.
- Bitcoin takes about 10 minutes to confirm.
- This speed makes Litecoin ideal for everyday transactions.
- As of August 2024, Litecoin is processing around 35,000 transactions per day."
- https://ecos.am/en/blog/the-complete-guide-to-litecoin-understanding-using-and-investing/?srsltid=AfmBOooQ9p6uaOGLjvWzNng2UDuJEyrOKCkTq6efbEhyZ9wRoJ93dxqF
"Faster Block Time: Litecoin has a block time of 2.5 minutes, compared to Bitcoin’s 10 minutes, which allows for quicker transaction confirmations." - https://komodoplatform.com/en/academy/bitcoin-cash-vs-litecoin/
"Litecoin has a faster transaction processing time than Bitcoin." - https://www.investopedia.com/articles/investing/040515/what-litecoin-and-how-does-it-work.asp
"While Bitcoin is the most popular and highly valued cryptocurrency, Litecoin offers faster transaction confirmation times due to its 2.5-minute block generation time (compared to 10 minutes for Bitcoin)." - https://www.moonpay.com/learn/bitcoin/litecoin-vs-bitcoin

Which experts are you following to come to your conclusion that bitcoin transaction settling occurs at the same speed as LTC?  Can you post the links?



I'm not changing the game at all. I knew from the beginning that you were going to claim that block frequency was why litecoin makes for a better currency which I why I said don't respond with that reason even before you did. Yet, you continued to anyway.

Quote
I would love for you to expand upon this so I could rebuttal more, but I fail to understand why you think it is of much better use as a currency. What reasoning do you have for this? (Please for the love of god don't say its blockspeed of 2.5 minutes).

Block speed is completely arbitrary. You could choose to have the difficulty adjust so that blocks are discovered every 1 minute, 2, 5, 10, 20 minutes, etc. It doesn't really matter. That doesn't change the speed at which transactions can settle with a decentralized block chain since those transactions are being settled across the same internet. If you are pushing the limits at which a blockchain can propagate and confirm blocks across the network and my transaction has a fee that places it last in line, the the arbitrary speed at which the blockchain confirms blocks is meaningless. The transaction will still be confirmed in the same amount of time. This is why it is a fallacy that litecoin having a 2.5 minute block confirmation time makes it a better currency and it is something that is constantly pushed by proponents of litecoin. This is something that big block proponents don't understand. Public blockchains are broadcast networks and simply scaling up the blocksize or choosing a faster confirmation time doesn't change the scalability/throughput problem.

Bitcoin validates 400k-500k transactions on-chain a day, but that's beside the point that you're missing.

I wasn't making gotcha statements. I am pointing out the reality of the fallacy you're making in regards to litecoin's throughput.

Lightning is an acceptable solution for scaling bitcoin. Saying it is "less secure than Bitcoin" because it performs transactions off chain tells me you don't really understand how lightning actually functions. Lightning transaction are bitcoin transactions. I can show you a lightning transaction and a bitcoin transaction side by side and they're the same. Same format, same signature scheme, same Script, etc. If I conduct a lightning transaction, I am conducting a Bitcoin transaction and it is still secure using the same bitcoin blockchain.

Lightning isn't perfect by any means, but saying it isn't secure or it is centralized is a pretty big misrepresentation. Sure, if I create all my channels to the most popular nodes then yes, it can lead to centrality. But AMPP, BOLT12, and new pathfinding algorithms go a long way toward limiting centralization. And at the end of the day, as a user you're in complete control over who you open channels with.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2306 on: January 10, 2025, 01:49:16 PM »
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  That's one thing that would have to be true to accept the lightning network as an equally secure way of using bitcoin for transactions.  If you can't find one, then you're making an apples to oranges comparison in a botched 'gotcha' attempt.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2307 on: January 10, 2025, 02:04:19 PM »
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  That's one thing that would have to be true to accept the lightning network as an equally secure way of using bitcoin for transactions.  If you can't find one, then you're making an apples to oranges comparison in a botched 'gotcha' attempt.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

My source is the lightning protocol specification. A lightning transaction is simply a 2-of-2 multisig bitcoin transaction. When I create a lightning transaction, I'm creating a bitcoin transaction. The blockchain isn't meaningless, that's not my argument. Where are you getting that from? The bitcoin blockchain is what secures these transactions. If you don't understand these topics, why do you argue them so fervently?
« Last Edit: January 10, 2025, 02:07:07 PM by lifeanon269 »

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2308 on: January 10, 2025, 02:21:44 PM »
Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

the_gastropod

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Re: What do you think of adding a low% of crypto allocation
« Reply #2309 on: January 10, 2025, 02:57:08 PM »
My source is the lightning protocol specification. A lightning transaction is simply a 2-of-2 multisig bitcoin transaction. When I create a lightning transaction, I'm creating a bitcoin transaction.

The whole raison d'être for the lightning network is to avoid expensive Bitcoin transactions. You require a Bitcoin transaction to open the lightning network channel. And another to close it. But no transactions within the channel are recorded onto the blockchain. And this is exactly the point GuitarStv is making. If LN is _just as_ secure as the Bitcoin blockchain, why bother with the rigamarole of the blockchain at all?

seattlecyclone

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Re: What do you think of adding a low% of crypto allocation
« Reply #2310 on: January 10, 2025, 03:17:55 PM »
Lightning isn't perfect by any means, but saying it isn't secure or it is centralized is a pretty big misrepresentation. Sure, if I create all my channels to the most popular nodes then yes, it can lead to centrality. But AMPP, BOLT12, and new pathfinding algorithms go a long way toward limiting centralization. And at the end of the day, as a user you're in complete control over who you open channels with.

This right here is going to be a barrier to adoption. Way too much learning required in order to do it right. To pay with Lightning I have to "open channels" with a certain number of "nodes," whatever that means. I'm supposed to educate myself on which nodes are good or bad to associate with. How am I supposed to know that absent some trusted (centralized) source telling me? What's the outcome if I choose poorly? Could I lose my money? Could my transactions get stuck in purgatory? I'm tech-savvy enough that I'll be able to do well at it if I ever had some actual use case for learning about and paying with Lightning, but most people aren't.

I'm reminded of when there was a brief migration to the decentralized social network Mastodon after Elon Musk bought out Twitter. I saw numerous messages about how it's good for the network if everyone would find a small server to join so things don't become too centralized, but the reality is there are a couple of big ones with "Mastodon" in their domain name that gobbled up a large share of the user base because most folks can't be bothered to spend time evaluating the various alternatives when there's a perfectly fine-looking (but more centralized) option staring them in the face.

Similar story with email. At its core it is a big decentralized network where anyone in the world has the right to start up their own email server, but the reality is that most people just sign up with an account at Google or Yahoo or Microsoft and call it a day. This has downsides! If you're trying to maintain a presence outside of the big email providers it's on you to make sure you do all the right things not to get your domain flagged by them as a likely spammer where all your messages will be sent to the round file. With less centralization there would be less ability for those few big companies to push everyone else around. The reality, again, is that most people can't be bothered to concern themselves with this, and just want to get themselves an email account with the least amount of friction in the signup process.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2311 on: January 10, 2025, 08:09:54 PM »
Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

You don't remember seeing it because you probably haven't read much of anything on it, judging by your use of terminology on the subject matter thus far.

If LN is _just as_ secure as the Bitcoin blockchain, why bother with the rigamarole of the blockchain at all?

You don't understand how it works, so rather than judge it based on your misunderstanding, I suggest seeking to learn instead.

All lightning network transactions are 2-of-2 multi-sig transactions. The funding transaction is 2-of-2 MuSig, all commitment transactions are 2-of-2 MuSig, and the closing txn is 2-of-2 MuSig. They're all the same. What makes it work is the bitcoin Script involved, mainly the CheckSequenceVerify OpCode that allows for hashed timelock contracts.

It starts with the 2-of-2 MuSig funding transaction. Let's say Alice and Bob want to create a channel between each other and each commit bitcoin to the channel (5 each). But, with 2-of-2 MuSig, if either party gets up and leaves and never to return, then that bitcoin is lost forever. So it wouldn't make sense to just create that transaction and leave because you'd then need to trust another party to stay involved to be able to spend that bitcoin that's apart of that multisig since each party has one of the two keys.

So at the time of creating that funding transaction, they also each create a 2-of-2 commitment transaction that spends the bitcoin that's in that original funding transaction, sign it with their key, and send it to the other person to hang on to for their signature. These are all regular normal bitcoin transactions constructed the same way that any other bitcoin transaction is constructed. There is nothing special about them. Lightning transactions (which is what these commitment transactions are) are bitcoin transactions. At any point in time, whenever one party wants to instantly spend some bitcoin as a part of this channel, they can just simply create a new commitment transaction in a similar fashion. They each create a new commitment with the new amounts for each side of the channel, sign it with their key, and send it over to the other person for their signature.

The trick here is in how they prevent the other person from spending a stale commitment transaction state. Since all these transactions are in fact valid bitcoin transactions, they can at any time be broadcast out on the the network and validated just like any other bitcoin transaction. So what prevents one party from broadcasting a transaction that is invalid? If Alice originally started with 5 bitcoin and sends Bob one bitcoin, what prevents Alice from later sending an old commitment transaction that says Alice owns 5 bitcoin again?

That's where the CheckSequenceVerify opcode comes into play with Bitcoin scripting. The commitment transaction that Bob create for Alice to sign says that Alice gets her bitcoin after a delay period that Bob specifies and before that Bob can spend that bitcoin if he has a revocation key. When a new commitment transaction is created, Alice shares with Bob her revocation key for the prior transaction. Now that Bob has the revocation key, if Alice were to ever attempt to spend this old commitment transaction, Bob can use that revocation key to instead punish Alice and take her bitcoin instead for trying to cheat.

Since these are all just regular bitcoin transactions that can be broadcast out onto the blockchain, they're secured with the same security behind that blockchain. You just don't need to involve it every time you create a new commitment transaction because the script allows for delayed enforcement.

As an analogy, it is like a court system. The court can only hear so many cases during the day, but the court is the final say in the matter. However, just because the court has limited time in the day to hear cases, doesn't mean we can't scale the enforcement of the legal system beyond what the court system can handle in a day. So we have contracts that two parties can sign between each other that can be upheld by the courts. The court doesn't need to hear every single contract that two parties ever sign between each other. The court only needs to hear when there is a dispute between those parties. If there is a dispute, then the court hears their case and determines the outcome.

Lightning is the same way. Two parties are creating legitimate bitcoin transactions between each other that has a contract using Bitcoin's Script language. You can create as many txns (or contract updates) as you'd like between parties without needing to involve the blockchain (court). But these contracts are still secure using this same blockchain (court/legal system). If there is a dispute or either party wants to exit the contract (2-of-2 MuSig), then that is when they get the blockchain (court) involved.

When you create lightning transactions, all you're doing is creating new 2-of-2 multisignature bitcoin transactions between you and another party. There is no difference between a lightning transaction and a bitcoin transaction. Same ledger, same Script language, same signature schemes, same address formats, same everything. Lightning isn't like a federated sidechain that involves completely separate functionality.

This does mean that the lightning network is an "online" network; meaning that you need to always be monitoring (or use an untrusted watchtower) to monitor for fraudulent transaction attempts. But given that you can set your own to_self_delay to be what you want it to be for the comittment transactions you create, then you can always ensure you have ample time to catch and punish transactions that attempt to cheat. This is why lightning is so secure and why there is almost never any fraudulent txns like this with lightning.

Here is a diagram to illustrate the typical lightning channel funding and commitment transactions:


Here is an example of a lightning transaction in a block explorer where you can see the OP_CSV in the witness script details to see what one looks like:
https://mempool.space/tx/51cce9ad9fe40d8eb5f044013e3e3874356e55b316c84e749a7d53fe27cfc540



This right here is going to be a barrier to adoption. Way too much learning required in order to do it right. To pay with Lightning I have to "open channels" with a certain number of "nodes," whatever that means. I'm supposed to educate myself on which nodes are good or bad to associate with. How am I supposed to know that absent some trusted (centralized) source telling me? What's the outcome if I choose poorly? Could I lose my money? Could my transactions get stuck in purgatory? I'm tech-savvy enough that I'll be able to do well at it if I ever had some actual use case for learning about and paying with Lightning, but most people aren't.

I'm reminded of when there was a brief migration to the decentralized social network Mastodon after Elon Musk bought out Twitter. I saw numerous messages about how it's good for the network if everyone would find a small server to join so things don't become too centralized, but the reality is there are a couple of big ones with "Mastodon" in their domain name that gobbled up a large share of the user base because most folks can't be bothered to spend time evaluating the various alternatives when there's a perfectly fine-looking (but more centralized) option staring them in the face.

Similar story with email. At its core it is a big decentralized network where anyone in the world has the right to start up their own email server, but the reality is that most people just sign up with an account at Google or Yahoo or Microsoft and call it a day. This has downsides! If you're trying to maintain a presence outside of the big email providers it's on you to make sure you do all the right things not to get your domain flagged by them as a likely spammer where all your messages will be sent to the round file. With less centralization there would be less ability for those few big companies to push everyone else around. The reality, again, is that most people can't be bothered to concern themselves with this, and just want to get themselves an email account with the least amount of friction in the signup process.

As with most things in tech, you don't need to understand the intricacies behind it to be able to use it. Certainly in the early days everything always seems complicated to use because UI always comes last. The foundation must be set first, then good UI/UX is built on top of it. There are plenty of good wallet apps out there now that abstract away the more complex channel management stuff that comes with the lightning network and leaves the user to just simply send and receive transactions instantly. Saying that it is a barrier to adoption when the final UI/UX of a technology isn't even in its final form yet is naive. That's like saying that dial-up modems were a barrier to adoption for the internet and now look at us today.

The important thing with these technologies is that users have the option to manage things on their own if they choose to. That is the benefit that open systems provide. They allow users to "opt-out" if they so choose. There will no doubt be those apps that choose to take the easy way out which results in certain compromises to security for the sake of convenience. The fact that there are choices though is what is important.

I use a social media protocol called NOSTR which is an open protocol and therefore there are numerous client apps out there with various features to them each. This choice is so important to open systems as it allows the user to choose what's important to them.

You mention email, and I agree there too. I host my own email on my own server and always have for the last 20+ years. Things have gotten better with email as most email providers simply require DMARC (DKIM and SPF checks) to ensure it is a valid sender. So hosting your own email nowadays doesn't really result in your email getting flagged as spam any more.
« Last Edit: January 11, 2025, 08:59:56 AM by lifeanon269 »

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2312 on: January 11, 2025, 03:26:45 PM »
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

My source is the lightning protocol specification.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

You don't remember seeing it because you probably haven't read much of anything on it, judging by your use of terminology on the subject matter thus far.

Could be.

Or maybe it's because the spec doesn't say anything of the sort.  The claim made is patently false, as pretty clearly described on the first page of the paper:
A decentralized system is proposed whereby transactions are sent over a network of micropayment channels (a.k.a. payment channels or transaction channels) whose transfer of value occurs off-blockchain
Very clearly, the lightning network bypasses the blockchain while performing transactions.  As a self proclaimed person who sticks to his area of expertise, I'm rather surprised you were unaware of this.

This puts the bitcoin supporter in a bit of a quandary.  Either:
- Transactions not recorded on the blockchain are perfectly fine and not necessary for safety (begging the question, why do people make a big deal about recording on the blockchain at all?)
- The lightning network is a less safe method of performing transactions where you just have to eat the risk to bypass the scaling/speed related flaws inherent to the fundamental design of bitcoin

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2313 on: January 11, 2025, 03:48:12 PM »
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

My source is the lightning protocol specification.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

You don't remember seeing it because you probably haven't read much of anything on it, judging by your use of terminology on the subject matter thus far.

Could be.

Or maybe it's because the spec doesn't say anything of the sort.  The claim made is patently false, as pretty clearly described on the first page of the paper:
A decentralized system is proposed whereby transactions are sent over a network of micropayment channels (a.k.a. payment channels or transaction channels) whose transfer of value occurs off-blockchain

That isn't the lightning network specification. That's the whitepaper. The specification is here:

https://github.com/lightning/bolts/blob/master/00-introduction.md

Furthermore, obviously you didn't even read the whitepaper and still don't understand how it works after my previous explaination. Page 5 of the whitepaper explains exactly what I just explained previously regarding the 2-of-2 multisig transaction and how they're revoked (Section 2.1).

At the end of the explaination (similar to the one I just gave above), they finish saying:

"Conceptually, this system is not an independent overlay network; it is more a deferral of state on the current system, as the enforcement is still occurring on the blockchain itself (albeit deferred to future dates and transactions)."

My analogy to the court system is apt. It is still using the court system (blockchain) to enforce security on the lightning network. I highly recommend reading what I previous wrote earlier in my last post along with section 2.1 of the whitepaper. Better yet, I recommend reading the specification itself, but that's more technical and if you don't already understand what I wrote in my previous post as well as the whitepaper which were written far less technically, then you probably won't understand the spec either.

Very clearly, the lightning network bypasses the blockchain while performing transactions.  As a self proclaimed person who sticks to his area of expertise, I'm rather surprised you were unaware of this.

This puts the bitcoin supporter in a bit of a quandary.  Either:
- Transactions not recorded on the blockchain are perfectly fine and not necessary for safety (begging the question, why do people make a big deal about recording on the blockchain at all?)
- The lightning network is a less safe method of performing transactions where you just have to eat the risk to bypass the scaling/speed related flaws inherent to the fundamental design of bitcoin

None of what you just said makes sense or applies there and very clearly demonstrates you didn't understand what was just written nor did you even read the very whitepaper you referenced yourself. You're clearly over your head here in the understanding of this and it isn't worth my time any longer trying to explain it to you any further. You're clearly not a very technical person and also on top of that, are closed-minded person that refuses to learn. I tried to be patient, but it is pointless to continue.

MustacheAndaHalf

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Re: What do you think of adding a low% of crypto allocation
« Reply #2314 on: January 11, 2025, 04:33:34 PM »
Let me start by saying I don't know much about transactions and channels on the Lightning Network

It starts with the 2-of-2 MuSig funding transaction. Let's say Alice and Bob want to create a channel between each other and each commit bitcoin to the channel (5 each). But, with 2-of-2 MuSig, if either party gets up and leaves and never to return, then that bitcoin is lost forever.
Instead of Alice and Bob, say this is a store and a customer.  I want to start my account with 0.002 BTC (just under $200 USD) as a customer.  Does the store also deposit 0.002 BTC, so both parties risk the same amount?

That would require a store lock up money equal to its customers potential spending.  As the customer spends money, that money also remains locked up in the channel.  They can't use customer spending to buy other products, if it remains locked in the channel.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2315 on: January 11, 2025, 05:51:26 PM »
Let me start by saying I don't know much about transactions and channels on the Lightning Network

It starts with the 2-of-2 MuSig funding transaction. Let's say Alice and Bob want to create a channel between each other and each commit bitcoin to the channel (5 each). But, with 2-of-2 MuSig, if either party gets up and leaves and never to return, then that bitcoin is lost forever.
Instead of Alice and Bob, say this is a store and a customer.  I want to start my account with 0.002 BTC (just under $200 USD) as a customer.  Does the store also deposit 0.002 BTC, so both parties risk the same amount?

That would require a store lock up money equal to its customers potential spending.  As the customer spends money, that money also remains locked up in the channel.  They can't use customer spending to buy other products, if it remains locked in the channel.

So in the vast majority of cases, when someone opens a channel, they're almost always just funding the channel themselves with liquidity on their side of the channel only. This means they need to spend money on the channel first before they can also then receive money on the channel.

Think of the channel like an abacus. Money flowing in the channel is just like the beads sliding back and forth to each side of the channel altering the liquidity available on each side. Money can be spent and received at any time so long as you have enough liquidity.

I also want to correct the idea that there is much risk involved with the channel. When you create a channel, in order for a channel to be created, both sides must create and exchange their respective commitment transactions. Because each party has a 2-of-2 MuSig bitcoin transaction already signed by the other party, there isn't really any risk involved since you already have what you need to spend your own bitcoin. At no point in using lightning are you not in control if your own funds.

Finally, while much of the convo was discussed on how lightning transactions work with respect to a single channel, that wouldn't be very useful if you needed to create a channel for every merchant you wanted to interact with. This is where the "network" part of lightning comes in.

If Alice wanted to pay Charlie, but Alice only has a channel opened with Bob, but Bob has a channel opened with Charlie, Alice can send funds through her channel with Bob onto Charlie using the same HTLC concept. You can send funds through the network using any number of hops until it reaches its intended destination. Payments also use onion routing for privacy and security, but that's another topic all together.

Also, while funds are in a lightning channel, while they're technically locked with a set duration to ensure no one steals funds, if both parties are online and cooperative, then both parties can close the channel immediately without requiring any wait period. This is how the vast majority of channels are closed. The only time the locked wait period is necessary is when one party goes offline and thus is not reachable and the other party wants out of the 2-of-2 MuSig contract.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2316 on: January 12, 2025, 07:25:14 PM »
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

My source is the lightning protocol specification.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

You don't remember seeing it because you probably haven't read much of anything on it, judging by your use of terminology on the subject matter thus far.

Could be.

Or maybe it's because the spec doesn't say anything of the sort.  The claim made is patently false, as pretty clearly described on the first page of the paper:
A decentralized system is proposed whereby transactions are sent over a network of micropayment channels (a.k.a. payment channels or transaction channels) whose transfer of value occurs off-blockchain

That isn't the lightning network specification. That's the whitepaper. The specification is here:

https://github.com/lightning/bolts/blob/master/00-introduction.md

Cool.  Still not seeing anything that supports your claim.  Can you post the part of the spec that you're referencing above?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2317 on: January 13, 2025, 05:31:56 AM »
Cool.  Still not seeing anything that supports your claim.  Can you post the part of the spec that you're referencing above?

If you genuinely want to learn, then BOLT3 describes transactions (funding, commitment, and closing) and how they work. Commitment transactions (lightning transactions) specifically is what I described and what you'll want to understand. But if you didn't understand what I wrote in a very non-technical fashion or even the whitepaper, then the spec will be even more difficult to understand for you. If you have specific questions and you're genuinely interested in learning, then ask away. But if you've already made your decision that bitcoin and lightning is "stupid" and you're pretending to be an expert in an area where you're clearly not and instead want to tell the actual expert he's wrong, then have a good day. I don't have time for that.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2318 on: January 13, 2025, 07:24:40 AM »
Cool.  Still not seeing anything that supports your claim.  Can you post the part of the spec that you're referencing above?

If you genuinely want to learn, then BOLT3 describes transactions (funding, commitment, and closing) and how they work. Commitment transactions (lightning transactions) specifically is what I described and what you'll want to understand. But if you didn't understand what I wrote in a very non-technical fashion or even the whitepaper, then the spec will be even more difficult to understand for you. If you have specific questions and you're genuinely interested in learning, then ask away. But if you've already made your decision that bitcoin and lightning is "stupid" and you're pretending to be an expert in an area where you're clearly not and instead want to tell the actual expert he's wrong, then have a good day. I don't have time for that.

Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.  I don't see anything indicating this in the link you provided (included in the BOLT3 description of transactions and how they work).  Given that, along with your own inability to find anything supporting the claim, can we agree that the statement made was erroneous?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2319 on: January 13, 2025, 08:04:32 AM »
Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.  I don't see anything indicating this in the link you provided (included in the BOLT3 description of transactions and how they work).  Given that, along with your own inability to find anything supporting the claim, can we agree that the statement made was erroneous?

Yes, that is an accurate statement. A lightning transaction (commitment transaction) is a bitcoin transaction. There is no difference between a lightning commitment transaction that is off-chain and one that has been broadcast and confirmed on-chain. In fact, they have to be in order for lightning transactions to be enforceable. As was said in the whitepaper:

"Conceptually, this system is not an independent overlay network; it is more a deferral of state on the current system, as the enforcement is still occurring on the blockchain itself (albeit deferred to future dates and transactions)."

I very literally linked to the document that supports this in the very specification of lightning that all lightning clients must adhere to in order for them all to be compatible with each other. The fact that you don't understand how it works and continue to insinuate otherwise just speaks to your own lack of understand and stubborness here. I even linked to an example lightning (commitment) transaction on-chain so that you could see the witness script for yourself. Click details on the transaction to view the witness script here:

https://mempool.space/tx/51cce9ad9fe40d8eb5f044013e3e3874356e55b316c84e749a7d53fe27cfc540

Code: [Select]
OP_IF
OP_PUSHBYTES_33 024315c06cde3d648e0fed2d5a1fabb70c761f935b12686fe0d3a91832156bec9b
OP_ELSE
OP_PUSHBYTES_2 9000
OP_CSV
OP_DROP
OP_PUSHBYTES_33 035e3fb9b9cd2834b8cebbbcfc7ef76d82c0ec9426a0597956dff11c8819cbb8ed
OP_ENDIF
OP_CHECKSIG

The script says that if the remote party has the revocation key, then it can spend this UTXO immediately. Else, OP_CHECKSEQUENCEVERIFY (OP_CSV) implements a timelock (in this case 90 blocks) that allows the UTXO to be spent by the local party after that time period elapses.


That is the very same script referenced in BOLT3 of the spec here:
https://github.com/lightning/bolts/blob/master/03-transactions.md#commitment-transaction-outputs
Code: [Select]
OP_IF
    # Penalty transaction
    <revocationpubkey>
OP_ELSE
    `to_self_delay`
    OP_CHECKSEQUENCEVERIFY
    OP_DROP
    <local_delayedpubkey>
OP_ENDIF
OP_CHECKSIG

Any commitment transaction (lightning txn) that is created between channel partners is a bitcoin transaction that can be confirmed on-chain. That is how this whole thing is enforced. Lightning transactions are bitcoin transactions and all bitcoin nodes recognize and validate lightning transactions as regular bitcoin transactions. If they didn't, then the lightning network wouldn't function the way it does, it just wouldn't work. Lightning transactions are bitcoin transactions.

Rather than continuing to insinuate that I'm wrong on a subject matter that you know next to nothing about and have read next to nothing about until this very discussion came about, why not defer to someone who has and learn? I've been very patient with you thus far, but you keep trying to argue.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2320 on: January 13, 2025, 08:09:24 AM »
So you're agreeing that there are lightning network transactions not performed on the blockchain (since LN stuff only interacts with it for initial balance and final transaction)?

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2321 on: January 13, 2025, 08:27:36 AM »
So you're agreeing that there are lightning network transactions not performed on the blockchain (since LN stuff only interacts with it for initial balance and final transaction)?

The whole entire point of the lightning network is to scale bitcoin beyond what is capable on-chain. Please quote me where I said otherwise. Did you not understand my court/legal system analogy that aptly described legal contract enforcement and courts as being analogous to lightning transactions and the blockchain?

What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  That's one thing that would have to be true to accept the lightning network as an equally secure way of using bitcoin for transactions.  If you can't find one, then you're making an apples to oranges comparison in a botched 'gotcha' attempt.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

I was very specifically responding to your question here. A lightning transaction performed off-chain is the same as one that has been confirmed on-chain. They're the same.

You're arguing that it isn't, but that very specifically is how lightning works. A lightning transaction performed off-chain IS a bitcoin transaction that can be broadcast on-chain. That's how the whole thing is enforceable. They're the very same transaction as I showed in my link to a mempool block explorer example. If a lightning transaction couldn't be confirmed on-chain, then it just wouldn't work. A lightning transaction is simply a bitcoin transaction that has been deferred as stated in the whitepaper. Lightning transactions are still bitcoin transactions:

"Conceptually, this system is not an independent overlay network; it is more a deferral of state on the current system, as the enforcement is still occurring on the blockchain itself (albeit deferred to future dates and transactions)."
« Last Edit: January 13, 2025, 08:37:21 AM by lifeanon269 »

41_swish

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Re: What do you think of adding a low% of crypto allocation
« Reply #2322 on: January 13, 2025, 08:32:53 AM »
Crypto is still complete nonsense and should be treated as such. I can understand buying Bitcoin and Eth, but if you are out here buying meme coins, I am curious how you even ended up on this forum.

I don't think anyone has posted anything positive about anything other than Bitcoin here for quite some time. You are the crazy crypto-fringe on this forum . . . ETH ??!!   pah !!      :-)
I was just scared of getting bullied. Crypto and NFTs are just nonsense.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2323 on: January 13, 2025, 08:46:10 AM »
So you're agreeing that there are lightning network transactions not performed on the blockchain (since LN stuff only interacts with it for initial balance and final transaction)?

The whole entire point of the lightning network is to scale bitcoin beyond what is capable on-chain. Please quote me where I said otherwise. Did you not understand my court/legal system analogy that aptly described legal contract enforcement and courts as being analogous to lightning transactions and the blockchain?

What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  That's one thing that would have to be true to accept the lightning network as an equally secure way of using bitcoin for transactions.  If you can't find one, then you're making an apples to oranges comparison in a botched 'gotcha' attempt.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

I was very specifically responding to your question here. A lightning transaction performed off-chain is the same as one that has been confirmed on-chain. They're the same.

You're arguing that it isn't, but that very specifically is how lightning works. A lightning transaction performed off-chain IS a bitcoin transaction that can be broadcast on-chain. That's how the whole thing is enforceable. They're the very same transaction as I showed in my link to a mempool block explorer example. If a lightning transaction couldn't be confirmed on-chain, then it just wouldn't work. A lightning transaction is simply a bitcoin transaction that has been deferred as stated in the whitepaper. Lightning transactions are still bitcoin transactions:

"Conceptually, this system is not an independent overlay network; it is more a deferral of state on the current system, as the enforcement is still occurring on the blockchain itself (albeit deferred to future dates and transactions)."

The deferral of state where transactions take place off blockchain is exactly what we've been talking about.  It's where all the security vulnerabilities of LN exist (the most recent one I can think of being replacement cycle attacks).  These attacks simply don't/can't exist for blockchain confirmed transactions.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2324 on: January 13, 2025, 09:58:57 AM »
The deferral of state where transactions take place off blockchain is exactly what we've been talking about.  It's where all the security vulnerabilities of LN exist (the most recent one I can think of being replacement cycle attacks).  These attacks simply don't/can't exist for blockchain confirmed transactions.

You're moving the goalposts. No where did I state that the threat model for lightning transactions is the same as the threat model for on-chain transactions. Please quote me where I've stated that if you think so. That's a very different statement.

All software and technology has vulnerabilities. That comes with the territory. It is always important to stay on top of vulnerability remediation and bitcoin and its eco-system is one of the most stringent when it comes to the SDLC and vulnerability disclosure/remediation. It is why almost all threats to bitcoin to-date have been mostly theoretical; even replacement cycling with lightning which has largely been mitigated with no known real-world attacks taking place.

At the end of the day, the biggest threat to one's money (whether that's bitcoin or US dollars) is yourself and the personal security you apply in your daily life. Personally, I feel safer with the security surrounding my personal bitcoin stash than I do with the money in my bank account. This is coming from someone that works in the Information Security department of a large multi-billion dollar US financial institution.

You have however made several statements that were patently false which is what I was countering earlier:

What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.

Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.  I don't see anything indicating this in the link you provided (included in the BOLT3 description of transactions and how they work).  Given that, along with your own inability to find anything supporting the claim, can we agree that the statement made was erroneous?

Do you now agree that the transactions are the same? In fact, the transaction ID (hash) for an off-chain lightning commitment transaction would be the same transaction hash of the transaction if it were confirmed on-chain. This was the entire reason why Segregated Witness was a pre-requisite to lightning becoming feasible with bitcoin to ensure that the transaction IDs weren't malleable. If they weren't the same, then the transaction hash would be different and thus lightning network transactions wouldn't be possible.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2325 on: January 13, 2025, 10:05:43 AM »
The deferral of state where transactions take place off blockchain is exactly what we've been talking about.  It's where all the security vulnerabilities of LN exist (the most recent one I can think of being replacement cycle attacks).  These attacks simply don't/can't exist for blockchain confirmed transactions.

You're moving the goalposts. No where did I state that the threat model for lightning transactions is the same as the threat model for on-chain transactions. Please quote me where I've stated that if you think so. That's a very different statement.


What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

My source is the lightning protocol specification.

A transaction performed off blockchain (on the LN) is not the same as one that has been confirmed on blockchain because it is not as secure.


Do you now agree that the transactions are the same?

No.  Transactions that are not written to blockchain in the lightning network are not the same as transactions recorded to the blockchain.  They're fundamentally different from at least a security perspective.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2326 on: January 13, 2025, 12:11:23 PM »
A transaction performed off blockchain (on the LN) is not the same as one that has been confirmed on blockchain because it is not as secure.

No.  Transactions that are not written to blockchain in the lightning network are not the same as transactions recorded to the blockchain.  They're fundamentally different from at least a security perspective.

You're misunderstanding information security and the context with which these technologies are used. You can't make a blanket statement that one is more or less secure than the other without understanding threat modeling and the use cases with which these technologies are to be used. One is not more or less secure than the other, they simply have different threat models and use cases.

For example, I can think of several examples in which using a lightning transaction would be more secure than using an on-chain transaction.

Let's take the example of a merchant that is accepting bitcoin as payment for a good in their store. A customer comes in to purchase the good and then leaves and the merchant has the option of accepting bitcoin on-chain transactions or lightning transactions. In this use case, lightning presents the more secure option for the merchant due to the instant settlement of lightning. If the merchant were to instead accept a bitcoin on-chain payment and the customer were leave with the goods in-hand prior to waiting +-10 minutes for an on-chain confirmation (because who wants to wait 10 minutes at checkout?), then the customer could simply use RBF to replace/reverse the transaction and now the merchant just lost the payment for their good. So there are absolutely use cases where lightning transactions provide higher security than on-chain payments, especially for use cases as currency in economic transactions like this.

It is important to understand threat modeling and when and where a given technology provides more or less security based on the threats for any given use case. Each use case presents different threats. In the above example, the primary threat to the merchant selling a good would be the reversal of a payment given once the good leaves their store. In this case, lightning transactions provide better security for the merchant.

At the end of the day you misrepresented lightning transactions with regards to how it functions in relation to on-chain transactions (LN transactions are bitcoin transactions). LN commitment transactions are bitcoin transactions. And you continue to misrepresent the security of these technologies with regards to their real world use cases and threats that are presented to them.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2327 on: January 13, 2025, 01:03:27 PM »
For example, I can think of several examples in which using a lightning transaction would be more secure than using an on-chain transaction.

Let's take the example of a merchant that is accepting bitcoin as payment for a good in their store. A customer comes in to purchase the good and then leaves and the merchant has the option of accepting bitcoin on-chain transactions or lightning transactions. In this use case, lightning presents the more secure option for the merchant due to the instant settlement of lightning. If the merchant were to instead accept a bitcoin on-chain payment and the customer were leave with the goods in-hand prior to waiting +-10 minutes for an on-chain confirmation (because who wants to wait 10 minutes at checkout?), then the customer could simply use RBF to replace/reverse the transaction and now the merchant just lost the payment for their good. So there are absolutely use cases where lightning transactions provide higher security than on-chain payments, especially for use cases as currency in economic transactions like this.

Good!  Then you do agree that lightning network transactions (which are not always recorded on the blockchain / not always public) are not the same as public bitcoin transactions recorded on the blockchain.

They can't be the same if there's a security difference between the two of them.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2328 on: January 13, 2025, 02:13:17 PM »
Good!  Then you do agree that lightning network transactions (which are not always recorded on the blockchain / not always public) are not the same as public bitcoin transactions recorded on the blockchain.

They can't be the same if there's a security difference between the two of them.

No. The hash of the lightning transaction as it exists off-chain is the same as the hash of the transaction as it exists on-chain. Are you arguing that data that is hashed multiple times that produces the same hash value is different data? That's cryptographically not possible.

Remember, you very specifically said otherwise numerous times or tried insinuating arguments that didn't make sense given how LN actually works. All this speaks to the fact that your original understanding of how this all worked was lacking and evolved as the conversation carried on:

Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

Very clearly, the lightning network bypasses the blockchain while performing transactions.  As a self proclaimed person who sticks to his area of expertise, I'm rather surprised you were unaware of this.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

There absolutely can be different threat models for the same data based on different use cases and states. Just because there is a different threat model for that data as it exists in different states (off-chain/on-chain) doesn't mean that the transaction data is different. The transaction ID is the same (a transaction ID is a hash of the transaction data) and therefore they're the same transaction, just in different states.

To illustrate this further, take password security. You can have a password, which is generally stored as a hash value for authentication, but that password can be in different states in different places and thus has different threat models and security risks based on that. That doesn't mean that the password is different in each of those states or use cases. The password, given that it will produce the same hash output value, is the same in all states that it exists. But the security risk and threat model based on how it is used changes. You can have a password stored in a password manager and securely submitted through various mechanisms for authentication (to websites, applications, etc). But you could also have that same password stored in a plain text document and pasted into a web form for submission. The password is the same. I don't think you'd argue otherwise. But given that its use is vast different and exists in different states in each use case, the threat model for one use case is vastly different than the threat model for the other and thus their risk is different based on their uses.

Just because lightning transactions have a different threat model than on-chain transactions doesn't make them different transactions. They're still bitcoin transactions and the hash of the LN txn as it exists off-chain is the same as the hash of the same txn as it exists on-chain. They just in different states and thus has different threat models and as I described earlier, one shouldn't be seen as being "less" or "more" secure than the other without taking into context the use case and threat model for that use case. As I illustrated, there are many cases where lightning transactions are actually more secure than on-chain transactions.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2329 on: January 13, 2025, 02:33:07 PM »
Good!  Then you do agree that lightning network transactions (which are not always recorded on the blockchain / not always public) are not the same as public bitcoin transactions recorded on the blockchain.

They can't be the same if there's a security difference between the two of them.

No. The hash of the lightning transaction as it exists off-chain is the same as the hash of the transaction as it exists on-chain. Are you arguing that data that is hashed multiple times that produces the same hash value is different data? That's cryptographically not possible.

Who was talking about hashing?  I was talking about the fact that LN transactions are not always publicly recorded on the blockchain, as a fundamental difference between a bitcoin transaction and an LN transaction.


Remember, you very specifically said otherwise numerous times or tried insinuating arguments that didn't make sense given how LN actually works. All this speaks to the fact that your original understanding of how this all worked was lacking and evolved as the conversation carried on:

Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

Very clearly, the lightning network bypasses the blockchain while performing transactions.  As a self proclaimed person who sticks to his area of expertise, I'm rather surprised you were unaware of this.

Yeah, I've been saying the same thing all along.

The lightning network was introduced as a workaround to handle the inability of bitcoin's blockchain ledger handling high volume of transactions.  It does this by bypassing the blockchain for some transactions.  This makes transactions performed in the lightning network fundamentally different than bitcoin transactions, which are all recorded to blockchain and publicly available.

The argument that bitcoin transactions are identical to lightning network transactions has been made by referencing multiple unrelated points without actually addressing the veracity of the claim.  I think that's the sticking point we're hitting here.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2330 on: January 13, 2025, 06:12:48 PM »
Who was talking about hashing?  I was talking about the fact that LN transactions are not always publicly recorded on the blockchain, as a fundamental difference between a bitcoin transaction and an LN transaction.

I brought up hashing as a means of illustrating that LN txns and bitcoin txns are literally the same. The data is the same. Decode a LN txn and a bitcoin txn data and they're the same. This is an important distinction when talking about the lightning network because there are many other second layer scaling solutions with bitcoin that this is not true with, such as liquid, rootstock, etc. So it is extremely important when talking about lightning to make the distinction that LN transaction are in fact bitcoin transactions and that it is not a separate sidechain.

Yeah, I've been saying the same thing all along.

The lightning network was introduced as a workaround to handle the inability of bitcoin's blockchain ledger handling high volume of transactions.  It does this by bypassing the blockchain for some transactions.  This makes transactions performed in the lightning network fundamentally different than bitcoin transactions, which are all recorded to blockchain and publicly available.

The argument that bitcoin transactions are identical to lightning network transactions has been made by referencing multiple unrelated points without actually addressing the veracity of the claim.  I think that's the sticking point we're hitting here.

Except you haven't been saying that all along. At one point you insinuated that the point I was making was that the blockchain itself is meaningless. However, if you understood how LN worked, then you'd understand that LN utilizes the blockchain for its security. Without the blockchain, LN wouldn't function because LN transactions, as I've said numerous times, are bitcoin transactions and bitcoin transactions without the bitcoin blockchain are meaningless.

What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  That's one thing that would have to be true to accept the lightning network as an equally secure way of using bitcoin for transactions.  If you can't find one, then you're making an apples to oranges comparison in a botched 'gotcha' attempt.

If your argument is that the blockchain itself is meaningless and arbitrary, so confirmations on it don't really matter . . . I mean . . . I totally agree with you.  But that's unusual for a cryptobro to admit.

That's not the only time you insinuated that either:

This puts the bitcoin supporter in a bit of a quandary.  Either:
- Transactions not recorded on the blockchain are perfectly fine and not necessary for safety (begging the question, why do people make a big deal about recording on the blockchain at all?)
- The lightning network is a less safe method of performing transactions where you just have to eat the risk to bypass the scaling/speed related flaws inherent to the fundamental design of bitcoin

Here again you insinuated that lightning makes the blockchain unnecessary when if you understood how it worked, then you'd again understand that LN security is a function of the blockchain. At no point did I imply that LN makes the blockchain unnecessary and if you understood how LN worked from the get-go, you'd understand why this insinuation you made was erroneous.

Back to my court analogy, this is like saying that private legal contracts between two parties makes the courts themselves obsolete without realizing that without the courts and legal system, your contract is meaningless and unenforceable.

You've also changed your tuned multiple times throughout the course of this discussion as you've been corrected throughout it. For example, you initially stated that LN was "less" secure by design:

The lightning network is by design less secure than Bitcoin because it performs transactions off the blockchain.

I then corrected you and explained that security isn't a "less" or "more" dichotomy and needs to account for the threat model and use cases for which the technology is being used in. I even gave a prime example where LN actually presents higher security than an on-chain transaction given the needs of the user. After that, you then changed your tune and used different terminology:

They can't be the same if there's a security difference between the two of them.

And that is just it. LN isn't "less secure by design" as you put it. It simply provides different use cases on top of the use cases provided by on-chain transactions. They are functionally the same types of transactions, but by deferring their state, you can provide additional scaling and settlement speeds, which is the entire point. A LN transaction can be both off-chain and on-chain (as I showed with my block explorer example) and therefore they are indeed the same type of transaction.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2331 on: January 14, 2025, 09:38:55 AM »
Very specifically, you claimed that the lightning protocol specification says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

Very clearly, the lightning network bypasses the blockchain while performing transactions.  As a self proclaimed person who sticks to his area of expertise, I'm rather surprised you were unaware of this.

Yeah, I've been saying the same thing all along.

The lightning network was introduced as a workaround to handle the inability of bitcoin's blockchain ledger handling high volume of transactions.  It does this by bypassing the blockchain for some transactions.  This makes transactions performed in the lightning network fundamentally different than bitcoin transactions, which are all recorded to blockchain and publicly available.

The argument that bitcoin transactions are identical to lightning network transactions has been made by referencing multiple unrelated points without actually addressing the veracity of the claim.  I think that's the sticking point we're hitting here.

Except you haven't been saying that all along. At one point you insinuated that the point I was making was that the blockchain itself is meaningless. However, if you understood how LN worked, then you'd understand that LN utilizes the blockchain for its security. Without the blockchain, LN wouldn't function because LN transactions, as I've said numerous times, are bitcoin transactions and bitcoin transactions without the bitcoin blockchain are meaningless.

Whether or not LN would function without bitcoin or the blockchain is neither here nor there.  You have repeatedly claimed that a transaction performed off blockchain is the same as one that has been confirmed on blockchain.  You've repeatedly attempted to justify this through unsupported claims that the specification says so, through obfuscation, and through long winded dumps of unrelated information.

Why have I been saying the same thing all along?  Well, it's because that's part of the definition of how the lightning network actually works:

A decentralized system is proposed whereby transactions are sent over a network of micropayment channels (a.k.a. payment channels or transaction channels) whose transfer of value occurs off-blockchain

The Lightning Network, developed by Lightning Labs, is a second layer for Bitcoin, which uses micropayment channels to scale the blockchain's capability and handle transactions more efficiently and cheaply. It is a solution designed to solve issues on the Bitcoin blockchain through off-chain transactions.

Transacting parties use the Lightning Network by opening a payment channel and transferring (committing) funds to the relevant layer-1 blockchain (e.g. bitcoin) under a smart contract. The parties then make any number of off-chain Lightning Network transactions that update the tentative distribution of the channel's funds, without broadcasting to the blockchain.

LN works by setting up a payment channel between two parties, where only the first and last transaction are put on the Bitcoin blockchain. Any number of transactions between the first and last will happen off chain, which means those transactions are not limited by the Bitcoin protocol.

Commitment transactions are a core part of the Lightning protocol and take the form of partially signed but unbroadcast transactions–that is, not published to the Bitcoin blockchain, but shared between channel counterparties–that represent updated channel balances.

The Lightning Network allows users to send or receive Bitcoin quickly and cheaply by moving transactions off of the main blockchain

The Lightning Network, also known as “Lightning,” is a second layer built on top of the Bitcoin blockchain. It enables fast, low-cost transactions by moving them off the main blockchain.

Lightning Network makes cheap and efficient peer-to-peer payments possible by utilizing a decentralized layer for off-chain transactions.

Scalability: By conducting the majority of transactions off-chain, the Lightning Network significantly alleviates the burden on the main blockchain, allowing it to process a higher number of transactions per second.

Privacy: Since the bulk of transactions occurs off-chain, the details of these transactions are not exposed to the public blockchain, enhancing user privacy.

The Lightning Network was designed to improve the speed and efficiency of transactions on the Bitcoin network by allowing users to make transactions off-chain without the need for block confirmation on the blockchain.

The lack of scalability has been one of the most talked about features as far as the Bitcoin blockchain was concerned. The addition of each block for every transaction severely hampered the scale of the network. The Lightning Network solves this by taking the transactions off the blockchain

Every bitcoin on Lightning begins with a transaction on the Bitcoin blockchain. That on-chain transaction is shared between two parties and serves as the reference point to start transacting outside the blockchain.

The basic concept behind the Lightning Network is payment channels. If I want to transact with my friend, we open an “off-chain” payment channel between us on the Blockchain.

From then on, the payment channel is open, and any number of transactions can directly occur between my friend and I—without payments ever touching the main blockchain.

On the Lightning Network, users can send and receive bitcoin without having to wait for confirmations on the blockchain.

The Lightning Network was created as a solution to address Bitcoin’s scalability challenges by providing a network of off-chain payment channels catered towards processing smaller Bitcoin transactions, thus taking pressure off the Bitcoin mainchain.

Parties then can conduct multiple Bitcoin transactions, although each isn’t verified individually on the Bitcoin blockchain at the time of execution on Lightning's network.

Lightning Network transactions are conducted off the blockchain without delegation of trust and ownership, allowing users to conduct nearly unlimited transactions between other devices.

The Lightning network is essentially a network of separate payment channels that allows for rapid and cost-effective transactions, circumventing the need to record every individual transaction on the blockchain.

We can use the example of Alice and Bob to illustrate how this works. Assuming Alice has deposited 0.5 BTC into a payment channel with Bob, this payment channel has a maximum capacity of 0.5 BTC. For example, if Alice now wants to send 0.1 BTC to Bob via Lightning, then Bob’s account balance in the payment channel is increased by 0.1 BTC (new account balance Bob: 0.1 BTC) and Alice’s is reduced by 0.1 BTC (new account balance Alice: 0.4 BTC). To finally execute the payment of the 0.1 BTC via Lightning, this account update must be confirmed, i.e., signed, by both Alice and Bob. However, this signed account update is not published as a transaction via the Bitcoin blockchain but is created and held back as a so-called “commitment transaction.”

The Lightning Network allows users to set up their payment channels. This means that thousands of small and medium-sized transactions can take place away from the main blockchain.

The lightning network achieves high-frequency payments by taking payments off-chain. This means that information about a transaction is not broadcasted to the whole network as with Bitcoin layer 1 transactions. Instead, lightning payments can be transmitted from the sender to the receiver through payment channels.

Although the prospective Bitcoin Lightning Network will operate off-chain, it will still require Lightning Network nodes to interact with each other to transfer funds and to continue to monitor the underlying Bitcoin blockchain.

Each Lightning Network node has the responsibility of monitoring the blockchain in which it retains tokens. There is a risk that if a node does not monitor the underlying blockchain, funds can be unwittingly stolen. Nodes on the Lightning Network will be required to keep a note of who is transferring what within each Lightning channel. These nodes must only monitor the validity of Bitcoin transactions with which they deal directly, while Bitcoin nodes have a much greater task of verifying every single transaction processed within the Bitcoin network.

The Lightning Network is a layer 2 Bitcoin scaling solution that enables microtransactions at a lower cost and much faster speeds compared to regular on-chain transactions.

The network is a channel-based solution that uses the Bitcoin blockchain as the main layer and opens or closes channels to it to settle the Lightning transactions off-chain.

The Lightning Network protocol was introduced by Joseph Poon and Thaddeus Dryja in a paper published in January 2016,  and pointed to this protocol as the solution to Bitcoin's scalability problem. The Lightning Network is a Layer 2 communication and payment protocol built on Bitcoin blockchain. In other words, the Lightning Network is a decentralised network for high volumes of instantaneous micropayments, which would allow the user to make immediate transactions with very low fees. The solution allows transactions to be processed off-chain, taking the load off the main network and improving network scalability.

The basic idea behind the Lightning Network is to create two-way payment channels between users, allowing multiple transactions to occur outside the main blockchain.

I can provide more sources, but I think that it should be pretty clear by this point that lightning network transactions are fundamentally different from a bitcoin transactions - in that the former are performed off the blockchain, and the latter are always recorded to the blockchain.  This was the main issue that I've been trying to straighten out.

So I guess I can ask one more time . . .
What's your source that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?

My source is the lightning protocol specification.

Can you quote the part of the lightning network specification that says that a transaction performed off blockchain is the same as one that has been confirmed on blockchain?  I don't remember seeing it.

If you're still not able to find part of the spec that supports your claim that's OK, there's a reason for that.  The claim is demonstrably wrong.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2332 on: January 14, 2025, 10:01:16 AM »
None of what you just posted invalidates anything I've ever said and if you don't understand that, then I don't have the time to further explain anything more to you. It is clear you just do searches for the first time and copy/paste without understanding what you're copying and pasting. You've obviously never even used bitcoin or lightning before either. I've explained everything pretty succinctly, linked directly to the part of the spec that I've explained myself here in my own words, and even provided examples of such, but you still don't understand. There is not much more I can do here. My posts are here for others that are interested in learning more I suppose.

GuitarStv

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Re: What do you think of adding a low% of crypto allocation
« Reply #2333 on: January 14, 2025, 11:47:16 AM »
Cool beans.

GilesMM

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Re: What do you think of adding a low% of crypto allocation
« Reply #2334 on: January 14, 2025, 01:25:45 PM »
I've been opposed to crypto so far but am considering adding some as a hedge against cyber attacks on investment banks which could cause a major market sell off.  Thoughts?

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #2335 on: January 14, 2025, 02:58:58 PM »
Crypto in general has been very highly correlated with the stock market, so I would tend to think that would be a bad strategy.

-W

eudaimonia

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Re: What do you think of adding a low% of crypto allocation
« Reply #2336 on: January 14, 2025, 04:03:41 PM »
None of what you just posted invalidates anything I've ever said and if you don't understand that, then I don't have the time to further explain anything more to you. It is clear you just do searches for the first time and copy/paste without understanding what you're copying and pasting. You've obviously never even used bitcoin or lightning before either. I've explained everything pretty succinctly, linked directly to the part of the spec that I've explained myself here in my own words, and even provided examples of such, but you still don't understand. There is not much more I can do here. My posts are here for others that are interested in learning more I suppose.

Thanks for the quality posts and rebuttal of the typical Bitcoin FUD.

This thread reminds me that we are still early in the adoption of better money.

GilesMM

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Re: What do you think of adding a low% of crypto allocation
« Reply #2337 on: January 14, 2025, 08:36:29 PM »
Crypto in general has been very highly correlated with the stock market, so I would tend to think that would be a bad strategy.

-W


Crypto hasn't been around long enough to say definitively but it is viewed by most as an alternative to stocks.  Some of the winds which affect stocks also affect crypto making it appear they are linked in some fashion, but during the last stock crash (2020), crypto surged as an alternative. I expect it will again when AI/cybercrime breaches of investment bank accounts occur.

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #2338 on: January 14, 2025, 09:02:37 PM »
Crypto hasn't been around long enough to say definitively but it is viewed by most as an alternative to stocks.  Some of the winds which affect stocks also affect crypto making it appear they are linked in some fashion, but during the last stock crash (2020), crypto surged as an alternative. I expect it will again when AI/cybercrime breaches of investment bank accounts occur.

You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

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Re: What do you think of adding a low% of crypto allocation
« Reply #2339 on: January 14, 2025, 10:50:22 PM »
Some of the winds which affect stocks also affect crypto making it appear they are linked in some fashion, but during the last stock crash (2020), crypto surged as an alternative.
During "the last stock crash (2020)", crypto fell alongside the stock market - it did not "surge".  Both hit a local high in mid Feb 2020, and both crashed in mid-March.  March 16 was a local low for both of them, and by the next week both surged off their lows.  They hit a high together, crashed together, and then recovered together.  The 2020 crash was a great example of crypto and the U.S. stock market being linked.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2340 on: January 15, 2025, 06:02:44 AM »
You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

I wouldn't say that it is because that's when investors started paying attention. I would more say that during that time frame from 2020 on, that's when there is a stark increase in money supply and thus just about any scarce asset when priced in USD their valuations went far higher. There is a very strong correlation between M2 money supply and the S&P500 and starting around 2019-2022 there is a notable uptick in the money supply which caused several years of heavy price inflation.

Prior this, bitcoin and the S&P500 had near zero correlation. Since then I still wouldn't consider bitcoin and the S&P500 as having high or strong correlation. They're certainly positively correlated, again, mainly because money printing causes all scarce assets to have higher valuations. But a Pearson correlation coefficient of .75 or higher is generally what is considered as having a strong correlation and bitcoin and the S&P500 when averaged out don't really quite hit that mark which shows that bitcoin still marches to the beat of its own drum at times. Over the last 90 days, bitcoin and the S&P500 have a Pearson coefficient of just 0.13, which is pretty close to having no correlation at all.

https://www.blockchaincenter.net/en/crypto-correlation-tool/?timeframe=90days&asset1=SP500&asset2=BTC

I think money printing greatly skews the pricing of scarce assets. It can mask market valuations and make people think that everything is going up when in reality you're barely beating the consumer price index. So there will always be some bit of correlation with scarce assets priced in USD simply because the value of the US dollar is going down in relation to all scarce assets.

I do think that over time however, bitcoin's correlation with the stock market and thus wider economy will become more and more correlated simply because investor trust in bitcoin will continue to grow and as the asset grows in maturity, the market size disparity between them decrease. This will also help drive bitcoin's volatility lower over time as well.

Juan Ponce de León

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Re: What do you think of adding a low% of crypto allocation
« Reply #2341 on: January 15, 2025, 06:39:32 AM »
You can view it any way you want, or you can run the numbers. Since about 2019 (when investors started paying attention) or so it's pretty highly correlated.

-Walt

I wouldn't say that it is because that's when investors started paying attention. I would more say that during that time frame from 2020 on, that's when there is a stark increase in money supply and thus just about any scarce asset when priced in USD their valuations went far higher. There is a very strong correlation between M2 money supply and the S&P500 and starting around 2019-2022 there is a notable uptick in the money supply which caused several years of heavy price inflation.

Prior this, bitcoin and the S&P500 had near zero correlation. Since then I still wouldn't consider bitcoin and the S&P500 as having high or strong correlation. They're certainly positively correlated, again, mainly because money printing causes all scarce assets to have higher valuations. But a Pearson correlation coefficient of .75 or higher is generally what is considered as having a strong correlation and bitcoin and the S&P500 when averaged out don't really quite hit that mark which shows that bitcoin still marches to the beat of its own drum at times. Over the last 90 days, bitcoin and the S&P500 have a Pearson coefficient of just 0.13, which is pretty close to having no correlation at all.

https://www.blockchaincenter.net/en/crypto-correlation-tool/?timeframe=90days&asset1=SP500&asset2=BTC

I think money printing greatly skews the pricing of scarce assets. It can mask market valuations and make people think that everything is going up when in reality you're barely beating the consumer price index. So there will always be some bit of correlation with scarce assets priced in USD simply because the value of the US dollar is going down in relation to all scarce assets.

I do think that over time however, bitcoin's correlation with the stock market and thus wider economy will become more and more correlated simply because investor trust in bitcoin will continue to grow and as the asset grows in maturity, the market size disparity between them decrease. This will also help drive bitcoin's volatility lower over time as well.

But what if the power goes out?  Bet you didn't think of that did ya huh, got ya there.

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #2342 on: January 15, 2025, 06:50:24 AM »
Well, regardless of your ideas on *why*, I think we can all agree Bitcoin is not a good hedge against a stock market crash. Or at the very least, there's no evidence it would serve well in such a role.

Whether it's a good hedge against cybercrime or the fall of the investment banks, well, that's way outside my wheelhouse. A really economically damaging event would probably crater the stock market and Bitcoin simultaneously, IMO.

-W

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2343 on: January 15, 2025, 07:18:09 AM »
Well, regardless of your ideas on *why*, I think we can all agree Bitcoin is not a good hedge against a stock market crash. Or at the very least, there's no evidence it would serve well in such a role.

Ya, I would agree on that. A stock market crash or correction generally results in much tighter monetary policy and money coming out of risk-on assets that I consider many investors treat bitcoin as currently.

I mostly see bitcoin as a hedge and counter-trade against loose and expansive monetary policy. So anything that restricts monetary policy or a move to economic austerity measures I would expect bitcoin to not perform well in.

LateStarter

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Re: What do you think of adding a low% of crypto allocation
« Reply #2344 on: January 17, 2025, 05:00:03 PM »
Hoorah !! Bitcoin smashed another ATH today !!   :-)

BTC-USD is firmly below its Dec2024 ATH, but . . .

In my world, BTC-GBP hit an ATH of about £86,930 today – approx. 2% above its previous Dec2024 ATH.

BTC-EUR, BTC-JPY, BTC-CHF, BTC-INR, BTC-AUD, BTC-NZD, BTC-ZAR. BTC-MXN all hit ATHs today.
BTC-VES hit ATHs yesterday AND today.

Not a very serious post. Just an opportune reminder that Bitcoin means different things and affects people in different ways in different parts of the world.

Glenstache

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Re: What do you think of adding a low% of crypto allocation
« Reply #2345 on: January 19, 2025, 07:42:46 PM »
How 'bout those $TRUMP and $MELANIA coins, eh?

waltworks

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Re: What do you think of adding a low% of crypto allocation
« Reply #2346 on: January 19, 2025, 09:04:23 PM »
If there's a benefit to humanity in crypto out there in the future, it's probably being undercut by that sort of garbage. Nobody is proposing that $trump will ever be useful for anything, it's just pure speculation (with a dash of insider trading thrown in so the creators can make a profit off the suckers).

The thing that sucks is that this sort of shit is gasoline for the fire of any recession we have. Even if you didn't participate, you can get burned by the absolute junkshow of every idiot who "invested" in a bunch of shitcoins losing their shirt/job/house simultaneously.

-W

41_swish

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Re: What do you think of adding a low% of crypto allocation
« Reply #2347 on: January 19, 2025, 09:15:50 PM »
Trump coin is dumping. I don't even know why you would buy that nonsense.

lifeanon269

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Re: What do you think of adding a low% of crypto allocation
« Reply #2348 on: January 22, 2025, 01:22:16 PM »
Really good analysis article from Fidelity on Bitcoin's volatility for those interested.

https://www.fidelitydigitalassets.com/research-and-insights/closer-look-bitcoins-volatility

Scandium

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Re: What do you think of adding a low% of crypto allocation
« Reply #2349 on: January 24, 2025, 07:38:22 AM »
If there's a benefit to humanity in crypto out there in the future, it's probably being undercut by that sort of garbage. Nobody is proposing that $trump will ever be useful for anything, it's just pure speculation (with a dash of insider trading thrown in so the creators can make a profit off the suckers).

The thing that sucks is that this sort of shit is gasoline for the fire of any recession we have. Even if you didn't participate, you can get burned by the absolute junkshow of every idiot who "invested" in a bunch of shitcoins losing their shirt/job/house simultaneously.

-W

This is a scam I find it hard to get upset about, in fact I think it's pretty great. When Trump et al steal money from the government we all loose. But his shitcoin scam just takes money from his idiot followers, and people who want to bribe him. It's annoying trump is getting richer, but since he'll do that no matter what I prefer when he's fleecing his screeching hog followers rather than public funds! Plus anything that cause more misery for trump fans is a win in a my book. I hope they loose all their money then apply for food stamps and realize trump cut those!