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Analysis

The Lightning Network: Truth Or Liar’s Poker

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As a former Wall Street analyst I always tried to know the most about whatever company I was assigned to work on.  Hours of research went into this effort. But in the end the question became: What’s the bottom line?

Today, there are dozens of crypto analysts but trying to get an answer on what’s the bottom line when it comes to The Lightning Network is another matter.  Bright, well traveled experts are claiming both amazing growth and acceptance while others insist TLN is a complete failure.

Here is my bottom line: The Lightning Network is a huge step forward for Bitcoin that will ultimately contribute to whatever level of mass adoption ends up taking place.  That is because its purpose is to facilitate small peer to peer transactions that represent the vast majority of daily financial transactions.

TLN probably sacrifices a certain amount of security… but, so what? No hacker in their right mind would waste their time swiping $5 and $6 transactions when their is far bigger fish to fry in the vaults of crypto exchanges. So security is not the most critical issue here.

After less than six months in operation TLN supporters and naysayers are engaged in a silly game. If we could only look into their crypto holdings I suspect we would have a clear picture of their bias.  But unless they choose to reveal their holdings, we will never know.

Background Briefing

In order to progress to mass consumption, crypto networks need to process transactions almost instantly.  As of August 1, the average confirmation time for Bitcoin was 23 minutes. That’s simply never going to foster mass adoption.

TLN is the technology touted as the solution to Bitcoin’s scalability problem. Introduced in March of this year, just about everyone is impressed with its growth.  And just about everyone agrees that the way to measure growth is by having a running total of the number of nodes.

Rompert.com counts 2014 nodes in the total TLN network compared with 29 when it was opened.  By some technique, they determined the network capacity at over $153,000. That is not a huge number by any means, but after all, TLN is still a baby learning to walk.

The Ridiculously Negative Case

Recently we ran across a headline claiming a 99% chance of failure of TLN on transactions larger than $200 and only ridiculously small sized transactions of less the five cents are completely successful.  If this were true, the next observation makes absolutely no sense whatsoever.

The claim is made that  since TLN was launched in March, transaction prices today are now $1.06 down from $55 back at the peak of December.  Meanwhile, transaction volumes on the network are nine times higher.

Somebody here is confused and I think it must be me.  Who in their right mind would pay a $1.06 fee to transact less than a nickel worth of crypto?

The Ridiculously Bias Positive Case

Completely contradicting the above expert is a quote from Bitcoin developer and so called long standing critic of TLN, Peter Todd.  Mountains of praise are now being heaped on TLN after Todd made payments of $3, $5 and $40 in near instant transaction time. Even though we are offered no proof that such transactions ever took place, at least we know where Peter is coming from.

The Bottom Line

Lightning Network promises to enable millions of transactions per second using a peer to peer network atop the Bitcoin blockchain. This is the fastest financial transaction network in the world, even compared to competing blockchain technologies, like Ethereum’s 15 tps, Ripple’s 1,500 tps, or the newly launched EOS with a maximum of 8,000 tps.

But the moniker, fastest financial transaction network in the world, is only a momentary notion. The Bitcoin Cash network is now claiming a new single day transaction record of 484 per second. Is this a valid number? Since the event just happen to take place on the first anniversary of the network launch, we suspect it is a phonied up claim: time will provide the truth.

There are all kinds of ways to measure the progress of TLN and we are in the time when there is enough date to prove the earth is flat.  To me the most important short term barometer is the growth of nodes. This is the truest measure of market acceptance. And TLN’s growth confirms it is going in the proper direction toward mass acceptance.

Headlines about TLN move Bitcoin prices so armed with this information makes for better investing skills, no matter if you are a trader or long term investor.  So much of the noise can be thrown into the category of short term imperfections or simply a game of liar’s poker.  

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 115 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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4 Comments

4 Comments

  1. Pgaucher

    August 4, 2018 at 10:43 pm

    The main debate around BTC vs BCH has to do with on-chain scaling vs. Off-chain scaling. BCH proponents are saying Bitcoin can scale on-chain without any issue and that Moore’s law will take care of bandwidth and storage issues just as it has for the past 9 years. So far, they are spot on. Using both on a daily basis, I cannot fault BCH in the speed and transaction costs.

    Ease of use is key to driving adoption and LN is far from being user friendly at this stage. It may be fine in 2 years, but by that time the BCH ecosystem will be so developed and well established that it will be difficult to catch-up.

    If scaling on-chain proves to be possible over time, then the utility of LN becomes questionable.

    I think a more in depth research is warranted which covers a number of items, including:

    – developers (# of teams) working on each platform
    – # of real life new applications being launched on both platforms
    – merchant adoption numbers (in pure #) for both platforms
    – mining costs for both
    – # of miners (not non-mining nodes) on both platforms
    – user satisfaction levels (merchants and consumers) for both platforms
    – transaction speed for different situations ($0.1 $1 $5 $10 $25 $100 $1000) and fees associated with each, on both platforms.
    – etc.

    Simply stating one’s position without supporting the position with factual information is similar to the current state of affairs.

    Full disclosure, I own BTC and BCH.

    • James Waggoner

      August 4, 2018 at 11:16 pm

      Thanks for the knowledgable and well reasoned comment. It is always good to have the facts.

  2. Daniel Won

    August 6, 2018 at 8:10 am

    No hacker in their right mind would waste their time swiping $5 and $6 transactions when their is far bigger fish to fry in the vaults of crypto exchanges. So security is not the most critical issue here.

    What if you swiped a million $5 or $6 transactions?

    Instead of robbing the bank, go after a million average people

    The latter becomes a lot easier with technology that allows for scale via automation (scripts, etc).

  3. James Waggoner

    August 10, 2018 at 8:31 pm

    You are right, so far scaling options have left the question of security unanswered.

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Altcoins

Litecoin Price Analysis: LTC/USD Set for Another Potential Explosive Move North as Bulls Penetrate Pennant Pattern

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  • Litecoin price on Saturday is seen holding decent gains of over 3% at the time of writing, as the bulls continue their latest push north.
  • Fundamental prospects surrounding the Litecoin Foundation remain strong and supportive of the price recovery.

LTC/USD since last week has been on a decent push to the north; the price has gained well over 40% since 7th February. A breakout kicked-started the previous week after the bulls managed to escape a narrowing daily range-block. LTC/USD was contained within the tightening structure from 11th January right up to 7th February, which then saw an explosive move shortly after. In terms of the range, this was seen at a high of $35 down to a low $29.

Between 10-11th February, Litecoin managed to see its highest levels since 14th November, which demonstrated its recovery. Price action over the last few sessions has been somewhat consolidating while maintaining the new heights. As a result, LTC/USD has formed a bullish pennant structure following the long pole from 8th February gains. Given the current formation, the price does appear to be subject to further upside movements.

Adoption Progress – Litecoin

Earlier this week, Spend App announced iit would begin supporting Litecoin. The Spend App currently facilitates users to buy, sell and pay with Litecoin in more than 40 million locations, a massive step towards mainstream adoption. According to Spend’s official website, card transactions can be performed in 180 countries.

The company tweeted, “Litecoin is now available on the SpendApp. You can buy, sell and pay with Litecoin with your linked bank account. Spend LTC at 40+ million locations with the Spend Wallet by instantly converting to fiat with the Spend Visa Card!”

Pricing in Litecoin’s ‘Halving’

In August of this year, Litecoin is expected to see it’s second ‘Halving’. In a PoW, or proof of work blockchain, halving results in the miner’s reward being cut in half. Although the halving causes miners’ reward to be reduced, they tend to Bboost the price of an asset over the longer-term.

The inventor of bitcoin, Satoshi Nakamoto, introduced the halving feature to protect against inflation. Besides, he wanted to ensure that not all of the blocks were mined so soon. Similarly to bitcoin, Litecoin has a cycle of “halving”. What will happen is at predetermined blocks, Litecoin’s mining reward will reduce. It will be Litecoin’s second halving, as the first one occurred back on 25th August 2015. At the time miners rewards went down from 50 LTC to 25 LTC, this time round miners reward will be 12.5 LTC.

Technical Review – LTC/USD

LTC/USD daily chart.

As detailed earlier, LTC/USD is subject to an extended move higher should the market bulls breakout of the pennant pattern. The upper part of the structure can be seen tracking around $44.00; this must be broken down to see a more significant wave of buying pressure. Looking to the north, the next realistic target for the bulls will likely be the psychological $50.00 mark. The price has not been up at these heights since 14th November 2018.

In terms of support, it is observed at the lower acting trend line of the pennant structure, $41.50. If this fails to hold a complete reversal of the latest run of gains may be seen. LTC/USD would then likely be forced to return down to the low $30 region.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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NEO Price Analysis: NEO/USD Bulls Eyeing an Explosive Move Higher as Cryptocurrency Enters Western Markets

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  • NEO/USD bulls are penetrating overhead resistance of a triangular pattern formation.
  • NEO Global Development (NGD) has set up an office in Seattle, Washington, keen to break into the Western markets.

NEO/USD: Recent Price Behaviour

The NEO price over the past week has managed to see some upside momentum, having gained around 25% since 7th February. At the time of writing, NEO/USD is running towards another session in the green, which would make it nine in the last ten. This is the best run of gains observed since the crypto market uptrend of December 2018.

In terms of the latest push to the north, NEO/USD bounced off a critical near-term supporting ascending trend line, which makes up a triangular pattern structure. It began the formation of this back in mid-December 2018 when the bulls entered a decent path of upside. However, the bulls eventually ran out of steam and were forced to narrow and trade within the confinements of the mentioned pattern.

NEO Looking to Make Ground in Western Markets

The team at NEO is taking serious steps towards expansion into U.S. markets, following its latest announcement to open an office in Seattle. This is the site of the new NEO Global Development (NGD) office. NGD will begin immediately recruiting for the new set up, which is going to be headed up by ex-Microsoft executive John deVadoss.

NEO is hosting its 2019 DevCon in Seattle, Washington between 16th February through to 17th. There is much anticipation around the announcing and details of NEO 3.0. As it currently stands, no clear specifications about the upgrade have been disclosed. Previously, NEO co-founder Erik Zhang said:

“NEO 3.0 will be an entirely new version of the NEO platform built for large scale enterprise use cases. It will provide a higher TPS and stability, expanded APIs for smart contracts, optimised economic and pricing models, and much more. Most importantly, we will entirely redesign NEO’s core modules.”

More on DevCon: NEO Price Update: Bulls Take Control as Anticipation for DevCon Builds.

Technical Review – NEO/USD

NEO/USD daily chart.

The NEO/USD price continues to trade within the earlier described triangular structure, demonstrating signs of late for a possible breakout higher. The markets bulls have been testing the upper acting trend line of the pattern; given the recent penetration, one would suggest a subsequent breach is likely. The resistance is currently tracking at $8.60; a break and daily closure above could invite another wave of buying pressure.

Further to the north, eyes would be on a retest of the significant psychological area of $10.00. The price last peaked up at these heights on 9th January, before running into sellers and being forced back south. At the time this was the highest NEO/USD had reached since 20th November. A push above this will then call into action $13.00, where the price consolidated briefly during the heavy November selling. Lastly, a return to the pre-November fall levels near $20.00 would be the next likely target.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 123 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Crypto Update: Another Spike Fails in Crypto-Land

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The major cryptocurrencies continue to follow the pattern which consists of sudden spikes followed by choppy sideways periods. Today, the top coins jumped higher, with the strongest currencies testing their recent swing highs, but the move quickly failed. The market continues to be dominated by low liquidity and the bearish long-term forces, making it difficult to make money trading the long side.

That said, the short-term break-outs, which were formed one week ago, remain intact and our trend model is also on short-term buy signals in the case of the relatively stronger coins. Despite the buy signals, traders should remain cautious with new positions, as the long-term forces continue to work against bulls here.

The leadership of last week’s move continues to be weak and without a new batch of coins hitting new short-term highs, it’s hard to see what could propel the market higher. The top 3 coins haven’t been able to pull their weight either, so odds clearly favor the continuation of the bear market from a broader perspective.

BTC/USD, 4-Hour Chart Analysis

Bitcoin remains stuck below the $3600 level despite today’s spike, and the bearish drift that started last week in the coin continues. BTC’s relative weakness is a negative sign for the whole segment, and although it’s still above the support/resistance zone just north of $3450, the long-term setup continues to point of the $3250 and $300o support levels.

That said, the short-term buy signal is still in place in our trend model, and traders could open small, speculative positions in BTC, with strong resistance zones being ahead near $3850 and between $4000 and $4050.

XRP/USDT, 4-Hour Chart Analysis

Ripple has also been showing relative weakness in recent days, and today it dipped back below the key $0.30 support/resistance level following the failed rally attempt. While the coin once again avoided a move towards the next main level of interest at $0.28, it is still likely to violate that level and test the August low near $0.26.

With that in mind, traders should stay away from XRP, with our trend also being on short- and long-term trend signals, and barring a move above $0.32, the immediate outlook is also negative, with further resistance levels ahead near $0.3550 and $0.3750.

Litecoin Tests $44 Level Again as Ethereum Clings to $120

LTC/USD, 4-Hour Chart Analysis

After settling down near the $41 price level, last week’s star LTC spiked as high as $44 today, but it failed to break-out above the key resistance zone. While the break-out remains intact and the MACD indicator still only points to a correction, the market-wide trends remain negative, and the previously leading coin hasn’t shown signs of relative strength in the last couple of days.

Traders could still hold their positions here even though a swing low is not yet confirmed, but strict rsik management rules should still be applied. A move back below $38 would trigger a downgrade in our trend model, which is still on a short-term buy signal. Above the initial resistance at $44, further levels are ahead near the recent swing high near $46 and at $51, while support below $38 is found near $34.50 and between $30 and $30.50.

ETH/USD, 4-Hour Chart Analysis

Ethereum has been trading in a narrow range today and the recent short-term swing high capped the rally attempt in the second largest coin. While the coin is still holding on to most of its gains from last week, trading well above the $112 level, the lack of bullish follow-through is a negative sign even regarding the short-term outlook.

The hostile long-term setup raises the odds of a failed short-term rally, and although pour trend model remains on a short-term buy signal, traders should only consider small, speculative positions here. The $120 level continues to be at the center of attention, with another strong resistance above that being found near $130, while further support is found in the $95-$100 zone.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 465 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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