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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

Cardano Price Analysis: ADA Moving Within A Deadly Range Block

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  • ADA remains vulnerable to further downside pressure, and there is potential for another 50% drop.
  • IOHK launch two new Cardano tools, ‘Plutus’ and Marlowe for smart contract writing.

Cardano’s ADA price has been very much depressed for the past five weeks now, dropping well over 60% within this period. As a result, ADA/BTC it has been forced to trade around the lowest levels seen since December 2017. It still has yet to show any promising signs of it escaping this stubborn downside trend.

Over the past five sessions, the price has managed to stabilize, producing a near-term bottom within the $0.02800 region. Important to note, with the above-detailed, ADA/USDT price action is moving within a narrowing range-block. This is subject to a potential breakout, causing a deeper drop, as part of this bearish market.

IOHK Launch Two New Cardano Tools

Earlier this week, IOHK, the engineering company that builds cryptocurrencies and blockchains, announced two new tools. These will be for the writing of smart contracts on the Cardano network. The tools named Plutus and Marlowe have now been launched in test format. They have been introduced to provide great value of assistance for start-ups, financial services and fintech industries, and academia. In all cases, the tools allow for preparation of blockchain contracts which will run on Cardano.

Plutus

Plutus will be providing general purpose programming language and tools for Cardano. The scientists and engineers at IOHK were able to combine the discipline of the Haskell functional language with Cardano. As a result, the creation of a platform for fintech developers to write secure and robust smart contracts is being developed.

Marlowe

Marlowe is a streamlined way for non-programmers to generate code and create software products. It has been noted at an easy-to-use tool. Even professionals operating within the finance industry who do not have any programming experience can build these automated financial contracts on the blockchain.

There was full coverage on this and an exclusive interview with IOHK and Cardano’s Charles Hoskinson, on this. See more.

Technical Review – ADA

ADA/USDT 4-hour chart

Looking via the 4-hour char view for ADA/USDT, vulnerabilities remain to the downside. As touched upon earlier, following the steep falls through November into December, price action has found some firmer footing. However, with this consolidation state, a range-block has been formed, which is subject to exposure by the bears.

ADA/BTC weekly chart

The near-term support as part of this current range should be noted at $0.02800. If this fails to hold, there could be some chunky downside to come. Judging from ADA/BTC, there could be room for another 50% move south. Further south eyes would be on the next major area of comfort, seen at the 0.00000550 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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4.5 stars on average, based on 81 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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Forex Update: Dollar Drops, Risk-On Currencies Rally on Trade Optimism

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1366 0.43%
GBP/USD 1.2634 1.19%
USD/JPY 113.25 -0.10%
AUD/USD 0.7223 0.26%
GOLD 1,249 0.09%
WTI Crude Oil 52.16 0.37%
BTC/USD 3,444 2.74%

The forex market saw another very active session, with the key topics of the recent weeks still making headlines and causing wild swings in the major currency pairs. The Brexit saga took another turn today, as Prime Minister Theresa May faced a no-confidence vote in her party following the delay of the vote on the draft plan in the British Parliament.

The result of the vote is not yet known, but analysts expect the PM to win the vote after she stated that she won’t run for another term in light of the Brexit-related chaos. The Pound has been rallying so far today together with most of the risk-on currencies, with yesterday’s decision to grant bail to the recently arrested CFO of Huawei boosting investor confidence across the globe. President Trump also hinted on progress on the ongoing talks, and that led to a sizable drop in the USD and in US Treasuries, as safe-haven flows reversed.

Technical Analysis

USD/CNH, 4-Hour Chart Analysis

The Dollar/Yuan pair, which has been crucial for all markets in recent months, broke its short-term uptrend on the news, and it fell to its lowest level in almost a week. The Chinese currency is still weaker compared to its post-trade-truce levels, but it’s also clearly above its October lows, despite the continued weakness in the Chinese economy thanks to the trade-related optimism.

That said, the long-term trend is clearly positive in the pair, and negative in the Yuan, and the credit-related troubles, which will likely weigh on the currency for years, will likely outweigh the topic of trade next year. We still expect the likely trade deal to cause a strong bounce in Chinese assets, but it’s unlikely to change the broader trends especially given the broad bearish shift in global risk assets.

EUR/GBP, 4-Hour Chart Analysis

The EUR/GBP pair is testing the recent break-out level amid the continued Brexit uncertainty, with the 0.90 level being in focus throughout the day. The short-term uptrend remains clearly intact in the pair, and bulls remain in control of the market from a long-term perspective as well.

Strong support is found near 0.8920 and a move towards the 2017 highs near 0.93 is possible in the coming months, even as both currencies remain among the weaker majors, and European growth is clearly weakening.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair is currently trading in a bearish wedge pattern amid the mixed price action in commodities, and the Aussie has been acting weak today, suggesting a likely move below the 0.7200 level in the coming days.

The currency is neutral on both time-frames currently, but a move below 0.7165 would mean that the long-term downtrend will resume following the two-month-long correction, that broke the long-standing declining trendline.

Gold Futures, 4-Hour Chart Analysis

Gold has been showing relative strength today compared to the other main safe-haven assets, which pulled back thanks to the positive developments in the US-Chinese diplomatic spat, and the precious metal successfully tested the recent break-out level.

Gold is very close to confirming a broader trend change, although it needs to stay above $1235, and a move above $1260 would suggest a test of the next major resistance zone near $1300, with strong support, found at $1215 and $1080.

Key Economic Events Tomorrow

 

ChartBook

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from 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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4.7 stars on average, based on 414 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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Zcash Price Analysis: ZEC/USD Shaping Up for Another Potential Fall; Coinbase Giving Zcash Away

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  • Zcash saw a decent bounce on Wednesday, jumping over 6%, but technical there are still some vulnerabilities.
  • Coinbase as part of their ‘12 days of Coinbase’ campaign, will be giving away ZEC to families in need in Venezuela.

ZEC/USD enjoyed a string of gains on Wednesday, jumping as much as 6% in the session. This appears to be somewhat of a consolation move for the bulls, as the sellers look to be exhausted. There has been little direction since the heavy pressure to the downside slowed down and stabilized on the 7th December. The price through the month of November dropped a hefty 63%, with that being carried through into December.

Coinbase Giving Away ZEC

Just a couple of weeks ago the popular U.S. cryptocurrency exchange Coinbase announced the listing of ZEC. They are now facilitating ZEC trading via Coinbase Pro, the proprietary trading platform. The service was made available for Coinbase Pro users in the U.S, U.K, the European Union, Singapore, Australia and Canada. On the back of this, ZEC/USD had jumped as much as 20% over the course of the day, following the announcement.

Most recently, Coinbase launched a Christmas campaign, which entails a series of announcements, dubbed “12 days of Coinbase.” Today was the second day, in which they detailed a gift in aid for distressed families in Venezuela. To provide help to these families, Coinbase will be donating $10,000 in Zcash to GiveCrypto.org. This is a nonprofit organization, which distributes cryptocurrency to people within poverty struck living conditions. $1.00 USD worth of ZEC will be deposited into crypto wallets of over 100 families in Santa Elena every day for three months.

Technical Review – ZEC/USD

ZEC/USD 4-hour chart

As touched upon above, ZEC/USD had been provided with a relief bounce in the session. However, price action is still moving within a bearish pennant pattern structure. This has been forming since the 7th December, within this consolidation mode. Price action is narrowing following the steep drop just some days ago. Technically, it does typically spell further potential trouble when behavior is as such currently seen – generating a calm before a further potential storm caused by the rampant bears.

ZEC/USD weekly chart

Given the above-mentioned pattern formation, ZEC/USD is vulnerable to another steep drop. Near-term support of this pennant should be noted at around $54.60. Should the bears manage to force a break, then expect the flood gates to open. A further wave of selling would likely follow, with the next major area of support, not seen until the $30 territory. The price was last down at these levels in February 2017. A demand zone can be seen running from $35 down to $26.

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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4.5 stars on average, based on 81 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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