BitMEX report: Bitcoin Lightning Network requires new types of investors

Researchers have taken a closer look at the Bitcoin Lightning Network. Apparently Lightning Networks are more scalable than expected.

Who does not remember when the big bitcoin hype at the turn of the year 2017/2018 exploded transaction prices and transactions waited days in the blockchain. One reaction was to accelerate the development of the Bitcoin Lightning Network. The Lightning Network is a network of different payment channels. These can be thought of as vessels that you fill with coins or outsource them.

After a defined period of time, the network seals the vessel and writes the respective bitcoin amount well. The sealed transactions now feed the network as a whole into the blockchain, causing only one transaction. This should keep the size of the blockchain smaller and make cryptocurrencies more suitable for everyday use.

BitMex detects potential from the Bitcoin Lightning Network

However, there were always concerns about the scalability of the network. These concerns have now been addressed in an article by the Bitcoin Mercantile Exchange Research Department, BitMEX for short. One focus was the “market dynamics” of the Lightning Networks (LN) in terms of transit fees. They also looked at the financial incentives that result from operating LN nodes.

Currently, capacity bottlenecks are a veritable goldmine for node operators as the cost of timely transaction routing increases dramatically. This ultimately hinders the entire financial flow. In the long term, the BitMEX research team believes that competition will be the main driver of market prices and fees for handling LN-based transactions.

The researchers say in their report:

 “While the return on investment for lightning network nodes is not yet convincing, we see potential in building this network as a business model.

According to the market analysis of BitMEX, low entry barriers can lead to lower fees for LN users, but not to profits on the part of the node operators. To the statement of technical analysts who claim that routing represents an unsolved problem in computer science, the researchers wrote:

    We do not really agree with that.

The BitMEX research team argued that the solution to the current routing problem of Lightning networks is to find the optimal paths between the channels.

It is an economic report

 “A key point is that investors usually rely on high returns through high risk.

the authors state. It is therefore fundamental to keep the routing fees balanced. This requires a new type of investor, who is also satisfied with low risk and resulting low yields. Furthermore, the authors are persuaded that low fees should be promoted in the interests of the overall market. The operators of the routing infrastructure will necessarily be able to generate less revenue.