@ -638,9 +638,7 @@ This naturally leads to the emergence of a fee market where users pay based on h
The scarce resource on the Bitcoin network is the space in the blocks. Bitcoin users compete for block space. And the Bitcoin fee market is based on available block space. The scarce resource in the Lightning network is the channel liquidity (capacity of funds available for routing in channels) and channel connectivity (how many and well connected nodes your channels can reach). Lightning users compete for capacity and connectivity and therefore the Lightning fee market is driven by capacity and connectivity.
On the Lightning Network, users are paying fees to the users routing their payments. Routing a payment, in economic terms, is nothing more than providing and assigning capacity to the sender. Naturally, routers who charge lower fees for the same capacity will be more attractive to route through. Thus a fee market exists where routers are in competition with each other over the fees they charge to route payments through their channels. Following general economic principles, given the same overall demand, more capacity and connectivity in the Lightning network leads to more competition between routers and to lower fees.
As a result, growth in adoption of the Lightning Network is expected to lead to lower Lightning fees, while growth in adoption of the Bitcoin Network likely leads to higher Bitcoin fees. This is because the Bitcoin network depends on a shared and scarce resource (block capacity) whose increase burdens all, whereas the Lightning network's only shared resource is again the Bitcoin blockchain for channel funding and closure transactions.
On the Lightning Network, users are paying fees to the users routing their payments. Routing a payment, in economic terms, is nothing more than providing and assigning capacity to the sender. Naturally, routers who charge lower fees for the same capacity will be more attractive to route through. Thus a fee market exists where routers are in competition with each other over the fees they charge to route payments through their channels.
==== Public Bitcoin Transactions vs Private Lightning Payments
Andreas M. Antonopoulos
4 years ago