Thread

Let’s be clear, if no one steps up and decides to run LSPs because everyone is worried about regulatory concerns, every bitcoin L2 system is toast - every one that has a reasonable security model relies on some kind of centralized or federated party that has similar concerns, even if they can’t seize funds. Without any L2 systems everyone using bitcoin will simply use custodial platforms because that’s the only way to get reasonable fees and payment latency. And don’t go yelling at ACINQ for deciding not to operate Phoenix in the US, the software required to run an LSP is open source, with only relatively minimal liquidity allocation logic required to get started. We need new entrants, and that means new companies who think the risk is manageable (I’m confident it is, but I can’t fault anyone for not wanting to take that risk). If you see someone suggesting ACINQ should just keep running, the correct response is “well why aren’t you running an LSP”.

Replies (14)

Uh, If Phoenix open sources their node ACINQ software I would run that LSP in a heartbeat, but they haven't done that. Instead I run 'LSP's like LNbits and LNDhub because they are ACTUALLY readily available software on consumer facing nodes.
↩ replying to Matt Corallo
Hashrate escrow does solve this. No corporation has to run an LSP or have massive liquidity to route payments. Instead, that liquidity can be used to buy L2 coins and onboard users directly without their own L1 txn. Some say it makes the miners a custodian, but that is not true. It would require thousands of hashers, collectively agreeing to continue stealing funds for 6 months- while everyone sees what they are doing every 10 minutes and they waste their Proof of Work. The only time drivechain funds will get "stolen" is when miners and economic nodes have agreed to kill a sidechain and hard fork to another. In this case, miners can offer atomic swap to the new chain before the old dies, and nobody loses money.
↩ replying to Matt Corallo
One pool cannot "just steal the money" and you know this. It takes six months with a constant 10 minute reminder that your pool is trying to steal the funds. Hashers have a ridiculous amount of time to switch, it is very easy to switch, and they are incentivized to switch because the pool is wasting their work. If a single mining pool has over 51% hashrate, then Bitcoin is in trouble anyway. BIP300 recognizes this and keeps the miners on a very short leash.