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Lyn Alden Analysis: A Look at the Lightening Network

Lyn Alden | August 2022

lightening network visual - Lyn Alden Analysis:  A Look at the Lightening NetworkThis article examines the relationship between a monetary asset being a store of value vs being a medium of exchange.  Specifically, it focuses on the scaling method of the Bitcoin network as its main example, but also takes a broad look at the history of trade-offs in the cryptocurrency space as well to see why a layered approach makes the most sense.

The primary goal of this article is to examine the topic of how bitcoin has evolved as a medium of exchange, and more broadly to analyze the order in which new monetary assets can be accepted as a store of value and a medium of exchange.  As a big part of that, I’ll include an analysis of the Lightning network, which is a small but fast-growing payments layer that is interwoven into the Bitcoin network.  Here are the sections of this article:

Intro

This article is long, so I’ll summarize the main points up front here, and then spend the rest of the article diving into the details.

-A truly decentralized and permissionless payment network requires its own underlying self-custodial digital bearer asset. If instead it runs on top of the fiat currency system or relies on external custodial arrangements at its foundation, then it is neither decentralized nor permissionless.

See:  The Most Efficient Payment System In The World: Bitcoin And The Lightning Network

-In order to create a truly new digital bearer asset that is useful for payments in the long run, it must also be an attractive store of value, so that a meaningful percentage of the population begins to persistently hold it as some percentage of their liquid net worth and be willing to accept it for goods and services.

-In other words, in order to create a decentralized version of Visa, beneath that you must first create a decentralized version of Fedwire, and along with that you must first create a decentralized version of digital gold. It’s hard to envision any other path succeeding.

Continue to the full article --> here


NCFA Jan 2018 resize - Lyn Alden Analysis:  A Look at the Lightening NetworkThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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