Coinbase may market their Lightning-enhanced custodial Bitcoin accounts as a solution. In these accounts, Coinbase can make real Lightning transactions on behalf of their customers; from a single Lightning leaf-node dedicated for use by all their customer accounts. Coinbase can market these four huge advantages above individual Lightning connections:
Coinbase can maintain a highly capitalized connection to the LN to cover the spending of its customers. As with any other channel, this will need to be re-funded on occasion. However, this wouldn’t need to happen anywhere near as often as would be required for all individual channels if each customer had their own connection to the LN. So, on aggregate, channel-funding costs would be significantly smaller in this setup. Also, as the channel-funding is not specific to any one customer, Coinbase themselves would bear the mining cost of these operations.
Given that Coinbase’s customers would only be using an allocated slice of Coinbase’s own LN wallet, there is no requirement at all for customer to add their own funds to the account up-front. Instead, customers could simply establish their account, and then start receiving payments in through the LN, or add to its balance by sending Bitcoin directly to Coinbase (along with the appropriate account information).
Coinbase will offer LN-connected custodial BTC accounts: the end for Bitcoin
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Given that thousands of customers would be sharing one real LN connection, their incoming and outgoing amounts would tend to balance out. This factor would allow Coinbase to set the spending limits of the LN channel to be far higher than an individual might set their own limit. But the limit could be much lower than the combined total of all limits the individuals would have set for themselves. This allows for a much smaller amount of capital to be at risk overall, but provides much higher individual spending and receiving limits to the customers.
Coinbase would bear the responsibility of doing this for the LN wallet, relieving their customers of the effort, cost and worry.
These are all significant economic incentives that will encourage the average person to use Coinbase or similar services instead of running their own Lightning node. These incentives are additional to those that have existed for a while, such as Coinbase’s general ease of use, security being taking care of for you, simpler funding options, etc. However, these new incentives are raw economic incentives rather than merely convenience/simplicity. This will have an even stronger effect of driving people towards using these custodial wallets instead of real individually controlled wallets.
Once a significant number of people are using Coinbase’s custodial accounts, Coinbase can then start to run fractional reserves and start loaning out Bitcoin. This is possible because the balances that their customers see are merely numbers on a screen. Coinbase would be fully technically able to manipulate these numbers as it sees fit, and would only need to keep enough Bitcoin in reserve to cover all withdrawal requests. At this point, even though real Bitcoin transactions would be underpinning everything, we will have returned to the situation Bitcoin was designed to resolve. Coinbase (and other similar Bitcoin banks) would be able to:
Spy on and demand explanations for transactions.
Censor transactions it doesn’t like.
Inflate the money supply.
Disconnect Bitcoin from their system entirely and settle amounts using any other token.
All of this will come about as a direct result of high base-layer fees. The only way to avoid this is to keep the base layer friction free.
> Inflate the money supply.
Do tell me more about that one, dear user?
THink of Fractional Reserve when the USD was still backed by gold.
You didn't buy BZC yet user? Kek
You mean they would never close the channel to synchronize with the blockchain? Is that what you're saying?
TLDR; if Coinbase wants to be a bad actor they can, just like now.
Things OP has never heard of:
>common sense
>competition
>basic economic theory
Except no one is forcing you to use the Coinbase LN hub. They'll be plenty of options to chose from and competition between the big hubs will ensure small fees and security
You fail to understand it's the banks you're dealing with, they aren't going to give up to a few hooded nerds, they could make BTC the only money the regulator will approve.
The banks could make BTC the only money that will be approved?! Well get this chucklefuck, no one gave anyone permission to make BTC in the first place. People will just use/develop new cryptocurrency.
I sincerely think you have zero clue how any of this works, including the lightning network.
the more they push this lightning agenda the worse it will get for them, will be fun to watch
That's what I'd thought. But I believe people will buy BTC even more as the plans to facilitate banking through it become public knowledge.
Big players can still dominate the market and collude with one another.
What's to stop HSBC, Chase, Deutsche Bank etc opening channels and forcing smaller players out, blackballing rivals etc? What happens if BTC survives 10, 20, 30 years and fees rise 100x or more?
Ok, so let's say you are right.
I don't believe you are, but let's pretend you are right and BTC is the future FedResCoin.
What now? What is your recommended alternative course of action?
The banks could regulate their way into being the hub owners. Banks always get what they want because they're "too big to fail". They could buy the exchanges and use the liquidity.
>What now? What is your recommended alternative course of action?
It's impossible to tell. The situation oculd be similar to the car industry buying all the public transport to shut it down.
Kil yourself
>Big players
You need at least 10,000 to 20,000 BTCs to call someone a mere player. And even then, that amount could budge it by a few dollars up or down - those players would all need to gather to do what you say.
Who would ever trust Coinbase with anything? They've fucked up about every way possible and are a single point of failure.
Sauce
