A research paper written by three Hungarians from Institute for Computer Science and Control (SZTAKI), Eotvos University from Budapest, and Szechenyi University from Gyor, respectively has just revealed what every Bitcoin Lightning Network participant knew intuitively.
According to ‘A Cryptoeconomic Traffic Analysis of Bitcoin’s Lightning Network,’ the most popular routing payment channel network off the blockchain is not economically viable, at present. Furthermore, the Lightning Network (LN) has also privacy issues given the current node distribution.
To reach these conclusions, the three researchers designed an LN traffic simulator for daily routing income and traffic estimations. They used data that dates back from late December 2017 to mid-May 2019. Still, for transaction fees analysis, they heavily relied on data from 2019.
It seems the annual ROI is way below 5% no matter the size of the node. To make it economically sustainable in the long run, the nodes would have to increase their fees by several thousand satoshis which would mean similar fees as on the blockchain. Currently, most nodes ask for less than 100 satoshis to route a given payment. As an alternative, the LN traffic would need to grow significantly if not exponentially for the current fee structure to actually incentivize the participants properly.
As for the privacy, introducing extra hops with the increase of traffic while maintaining the same fee levels as today could solve all problems. Otherwise, an increase in fees could compromise the actual anonymity LN is promising.
More Tezos Based Financial Products For Traders
After launching several Exchange Traded Products (ETPs) related to the cryptocurrency market, in the spring of 2019, Swiss-based fintech company Amun AG announced, yesterday, the release of yet another innovative financial product: ‘the world’s first staking ETP.’
Worth noting Tezos Foundation – the company that basically organized the famous Tezos Initial Coin Offering (ICO) raising $232 million in July 2017 – is also based in Switzerland.
The Amun Tezos ETP (AXTZ) tracks the performance of the Proof of Stake based crypto asset with the possibility to earn additional yield through staking (or as it is called in the XTZ ecosystem, baking) rewards.
Amun AG already has five more single-asset based ETPs and three cryptocurrency indexes.
That’s not all though, for Tezos. At the time Amun AG announced its new financial product, cryptocurrency exchange Binance tweeted out an interesting announcement.
The margin pairs will be XTZ/BTC and XTZ/USD.
What does it mean for the average Tezos investor? Maybe more shorting opportunities for the big players at a time when already a part of the community is unhappy with the way big bakers are dumping their rewards, thus making the journey to the Moon much more tedious.
What does the recent news mean for Tezos in your opinion? Will the Lightning Network eventually become sustainable from an economic standpoint? Share your thoughts in the comment section below!
Images courtesy of 1ML & Medium/Staked.