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Bitcoin Lightning Network Liquidity Falls Below 5,000 BTC as Former Openbazaar Developer Chris Pacia Says Platform Could “Never Work”

Last Updated May 4, 2024 9:12 AM
Teuta Franjkovic
Last Updated May 4, 2024 9:12 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Ex-lead Openbazaar developer Chris Pacia criticized the presentation of Lightning Network as a scaling solution.
  • He claimed technical experts misled the public about LN’s effectiveness and censored opposing views.
  • The Lightning Network has faced challenges, including declining liquidity, which recently dropped below 5,000 BTC.

Chris Pacia, the former lead developer of the now-defunct decentralized marketplace Openbazaar, has critcized  the process that led to the adoption of Bitcoin’s Lightning Network (LN) scaling solution.

Additionally, concerns about LN’s effectiveness have been made worse by its declining liquidity, which recently dipped below 5,000 BTC.

Chris Pacia Criticizes Misleading Advocacy During Bitcoin Blocksize Wars

Pacia criticized  the handling of Bitcoin’s Lightning Network (LN) shortcomings during the blocksize wars, eventually leading to a hard fork of Bitcoin.

He argued that, within the context of the blocksize debate, technical experts misrepresented the LN’s effectiveness to the general public.

Pacia highlighted  that the general audience, lacking technical expertise, could not fully grasp the implications of either increasing Bitcoin’s block size or adopting LN. He claimed technical experts who raised concerns about LN were censored and banned from various distribution platforms.

As a result, non-technical figures in the cryptocurrency community, such as Saifedean Ammous, Peter McCormack, Tone Vays, and Stephan Livera, had to depend on the views of the non-banned experts to form and share their opinions on the matter.

However, amidst the blocksize wars, Pacia believes that these experts knowingly misled the public to gain support for their side. According to Pacia, this was a strategic move to influence the mainstream audience’s perspective on the scaling debate.

He said :

“They knew lightning would work like dog sh*t. But it was considered a “noble lie” to win the blocksize wars.”

Devs Criticize Lightning Network as Centralizing and Overly Complex

Chris Pacia is among several developers who have recently criticized the Lightning Network (LN) due to its complex mechanics and potential for leading to centralization. Last year, Bitcoin developer Matt Corallo voiced his dissatisfaction with LN. Meanwhike, veteran Bitcoin enthusiast John Carvalho also expressed severe criticism  of LN, also stating  that “the design is kind of a joke.”

Carvalho, who previously advocated for reducing the Bitcoin block size to 300 kilobytes to promote Lightning Network adoption and establish a competitive fee market, has shifted his stance towards favoring block size increases for scaling. Carvalho also believes that there are practical limits to how much Bitcoin’s block size can be increased responsibly.

Moreover, Carvalho contends that high transaction fees contribute to centralization. This is because, he says, they restrict the ability to transact to a smaller group of users who can afford these costs. This is similar to how larger block sizes can limit the number of individuals capable of running nodes due to increased resource requirements. He advocates for a balanced scaling approach that avoids the extremes of making node operation exclusive or making transactions unaffordable.

Security Concerns and Declining Liquidity Cast Doubt on Future

Additionally, concerns about LN’s effectiveness have been compounded by its declining liquidity, which has recently fallen below 5,000 BTC. This drop is accompanied by a decrease in the number of active nodes and channels over the past year.

Last year, the Bitcoin Lightning Network faced significant challenges. Then, developers found a major security vulnerability, casting a shadow of doubt over the platform and undermining user trust. This vulnerability facilitated a “cycling replacement attack,” a term introduced  by Lightning Network developer Antoine Riard.

The vulnerability is associated with the Lightning Network’s Hashed Timelock Contracts  (HTLCs). These contracts help stop fraud in Lightning transactions without the need for verification on the Bitcoin mainnet. The vulnerability’s discovery of this vulnerability was first made public by Riard on October 20.

In response, stakeholders in the Lightning Network acted swiftly to put measures to mitigate risks in place However, these initial measures are not able to handle more sophisticated attacks. Riard acknowledged that, while the current mitigations offer some protection against simpler attacks, they fall short against more complex ones. This, he said, indicated that a more comprehensive, long-term, solution had to properly secure the network.

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