Rain and sunshine in the Lightning Network

The Lightning adoption is progressing. Since a few days the company Blockstream publishes daily a new application, which uses the Lightning Network. But the Second Layer Network still suffers from teething troubles.

The Lightning Network, the off-chain solution to Bitcoin’s scaling problem, is on everyone’s lips. It should not only solve the classic problem of transaction fees in a sustainable way, but also enable a fast exchange into other crypto currencies via Atomic swaps.

Lightning-Adoption progresses, first applications are the Bitcoin formula

A few days ago BTC-ECHO reported that the Lightning Network has now arrived in the Main Net. The number of Lightning Nodes has now reached almost 1,500, the Bitcoin formula adoption is progressing faster than the Bitcoin formula Cash acceptance.

This positive news is currently culminating in the neologism of LApps. LApps are Lightning Apps, i.e. applications that would not run without the Lightning Network. Blockstream has been publishing a new LApp every day for almost a week now.

These primarily have micro-payment solutions in mind and want to offer payment solutions based on Bitcoin, especially in the content sector. One feels reminded of SatoshiPay: via FileBazaar, micro-payments should be possible for users who offer photos, videos or documents. Lightning Publisher for WordPress is a distinctive name: bloggers can use it to place individual posts behind a paywall. With Nanotip you can pay other Litecoin users small amounts as recognition – Reddit users quickly feel reminded of tipbots. Finally, PayPerCall is intended to extend the concept of microtransactions to various API calls.

Loss of money through the Bitcoin trader

So far, the Bitcoin trader experience of the Lightning Network coincides with what you see when you look out of the window. The spring fever, however, is clouded by an unpleasant news: Is Bitcoin Trader a Scam? Read This Review Before You Sign Up! One user stated that his Bitcoin transaction was lost via the Lightning Network.

A user with a faulty channel database (i.e. a database containing the available payment channels for the network) did what anyone would have done: restored an old backup.

But now the problem was that this backup was obsolete. So the Lightning Node of the unfortunate sent the wrong status of the payment channels. Other nodes recognized this error, interpreted it as an attack attempt and acted accordingly.

Strictly speaking, the Lightning Network worked as it should: it detected that the database had stored incorrect information regarding account balances. This would be tantamount to a double-spending attempt.

Such a strict procedure is important: via the Lightning Network, the sender only announces in the first step that he wants to send a certain amount x to the recipient – an actual transaction takes place later. Such announcements wouldn’t be worth much more than promises if they weren’t controlled and synchronized decentrally.

And it is precisely this control that the poor user has fallen victim to. By the way, the user does not have to complain about a big loss: He only wanted to send the equivalent of 20 Euros.

Errors in the application layer, not in the Lightning Network
The error was therefore less one of the lighting network itself than of the application level. The Lightning Client should not allow transactions based on an old channel database in the first place, so that such errors cannot happen.

You can see from the incident that the Lightning Network certainly still has to do its homework. For the individual Bitcoin user, this means that he should be careful with Lightning transactions for the time being and not send excessive amounts of money. However, this should be possible with a network that supports microtransactions.

XRP price with over 60 percent weekly gain – How justified is the price explosion of the Ripple Coin?

XRP, Ripple’s token, has rallied massively this week, with the XRP price climbing over 60 percent in just one week. One of the main drivers behind these price jumps is the announcement that the XRP token will be deployed within a payment network for the first time. So far in commercial practice only the infrastructure of the company Ripple was used without XRP being used.

Originally, Ripple took over to attack the supremacy of the transaction processing standard SWIFT. After 45 years of a quasi-monopoly, there are good reasons to replace the outdated SWIFT settlement standard with a new, faster, cheaper and – ideally – even more decentralised system. But how decentralized is the bank coin at all? What role can the crypto currency XRP play here?

And what are the chances of seriously competing with Bitcoin profit?

The Ripple protocol is basically Bitcoin profit and can also be operated without the company Ripple. In practice, however, it is a fairly centralized service that is used by individual banks detached from the company’s own currency XRP. More than 120 banks use the Ripple infrastructure xCurrent to accelerate transactions – completely without XRP tokens.

Token Economy with xRapid?
In order to make up ground against the SWIFT settlement standard, xRapid, a payment infrastructure that this time also uses the XRP token, is to be launched in the coming weeks. The XRP token will be used as an “intermediate currency”, which will be significantly faster and cheaper than traditional bank transfers. Ten banks are currently testing the new Ripple processing standard. However, it is uncertain or difficult to assess at this point whether this standard will be able to assert itself in practice. This service is aimed primarily at financial institutions in emerging markets, which often have to contend with high liquidity costs. Finally, remittances in emerging markets often require prefinanced accounts in the targeted local currency. With xRapid, these liquidity costs could be reduced. In any case, the XRP price responded to the announcement on September 18th with a 17 percent jump and, as we can see from the current price trend, was able to continue the rally. With xRapid, XRP could for the first time fulfil a real function outside speculation.

The matter of Bitcoin profit

It is always a controversial topic how decentralized Ripple or XRP is. On the one hand, it is an open source protocol – anyone can set up a Bitcoin profit network completely detached from the company and act as a validator. However, the prerequisites for this are very high and involve a lot of inconvenience. Therefore, it is not surprising that the open source protocol is hardly used outside the Bitcoin profit. The current use case, the use of the Ripple infrastructure without XRP, is a highly centralized affair.

Another thorn in the side is the distorted separation of company and crypto currency. So Ripple never gets tired of emphasizing that the company basically has nothing to do with the crypto currency. A statement that is misleading, considering that Ripple keeps the XRP in escrow and uses it to finance the company. Also the infrastructure xRapid is clearly tailored to XRP. Accordingly, it doesn’t seem very authentic to pretend that Ripple and XRP are completely detached from each other.

The fungibility of the currency

DASH is, as you have said, a crypto currency that allows anonymous and instantaneous transactions, making it an electronic counterpart to cash.

How is this technically realized?

Unlike other crypto currencies, DASH uses a network of servers that perform more tasks than the typical nodes. That is why they are also called master nodes. This is a decentralized network, since in principle anyone can start their own master node.

For instantaneous transactions, a randomly selected group of master nodes – the so-called quorum – can block transactions so that double spending is avoided. With the help of this quorum, the payee knows after a little more than a second that the payment has been securely received. This makes DASH a suitable solution for fast transactions such as buying a computer.

Master Nodes also give users great privacy by deleting the transaction history of individual coins on request, thereby increasing the fungibility of the currency.

In addition to anonymity and instantaneous transactions, the third keyword that comes to mind about DASH is the special governance system: not only the miners, but also the operators of the master nodes as well as other stakeholders who support the public relations work for the digital currency receive a share of the royalties collected through the mining and transaction fees.

How is it guaranteed that the money is shared fairly between these parties?

In my opinion, the governance system is the greatest strength of DASH! Through this system everyone can make his contribution to the development of the network.

This guarantees that the fate of the crypto currency is not only in the hands of the miners and a defined circle of developers. Anyone can submit a proposal to the network.

They can ask for a consensus decision of the whole network on important questions or ask for help to start realizing ideas to improve the digital currency or its ecosystem.

These proposals are voted on by the network itself (i.e. the masternode operators), ensuring that these funds are made available to projects that the network finds valuable.

On the last question, I would like to go back over it: one could say that the governance system of DASH is reminiscent of a DAO. Now we know about the end of the best known DAO. Do security concepts exist that make something like the DAO exploit impossible?

Well, DASH’s code is based on Bitcoin’s – which has proven to be extremely robust through many tests. In addition, the code that governs governance has been stable and unhacked since mid-2015.

The code is tested before each new release according to all rules of the art and is open source, so that everyone can take a closer look at this code themselves.

The operators of master nodes are, as you have already briefly explained, those who decide which proposals are accepted or rejected. If a project is approved and a certain amount of money is available to the submitters, how is this distribution regulated? Is there a kind of Smart Contract or how do you guarantee that the project will receive the requested amount?

The network itself regulates the payment to the addresses of the approved projects. Every month, all approved proposals whose outstanding amounts are within the budget are paid directly by the block chain itself. This is done with such banned “super blocks”. The process is completely automated and nobody can intervene here.