How The Banks Bought Bitcoin | Lightning Network


Hey!, you!, you may have seen something about Bitcoin a few years back. It sounded revolutionary. This was going to replace the banks. It was permissionless decentralized peer-to-peer electronic cash. No one can take it from you. You can send any amount for less than a penny fast. But damn, the price was $100 and it would probably fail anyways so you better play safe and see what happens. Then you saw the price recently on the news, $15,000 and immediately your stomach drop, because you realized that how rich you could have been, but you blew it. But you realize, that is still going up fast and if you invest now, you’re probably still in the ground floor. When you finally get your Bitcoin, after waiting five hours for it to confirm, you realize that some is missing. Turns out that your small investment of thirty dollars, fifteen dollars went towards the transfer fee to put it in your wallet This is what was going to change the world? Let me fill you in on what happened, while you were gone. Transaction fees have arisen because of the block size. The block size is 1 megabyte currently. It only allows for a few transactions per second to take place. Many more happen than this, so the people who pay the highest fee get to go first in line. On december 12, 2017 at the time i’m recording this video, the average transaction fee today was twenty four dollars and forty cents This problem only gets worse with time and his adoption spreads Instead of raising the block size again The development team has decided to go for a second layer called the Lightning Network. It promises instant transactions, super low fees… and this is the basics of how it works: Let’s say me and you transact regularly so we open a channel for two Bitcoins. I send a Bitcoin and you send a Bitcoin to a multi signature address where it’s temporarily locked away. Now we are free to trade two Bitcoins back and forth with no fees, as long as we both sign each transaction. This is because the actual Bitcoin was never moved. We’re essentially trading for the rights of the coin, offchain, similar to an IOU. When we close our channel it settles on the Blockchain. Our IOUs are redeemed and we’ll get our share of the real Bitcoin. The only time the high transaction fee occurs, is when you open or close a channel to settle up. You want to transact with somebody you don’t have a direct channel open with. Let’s say you want to transact with Bob, and pay him 1 Bitcoin. Bob does not currently have an open channel with you. And you don’t want to have to pay the fees to open another channel. It turns out that my first cousin Sam has an open channel with Bob. You could send the payments through our channel and use the channel I have opened with Sam and finally from Sam to Bob paying me and Sam very small transaction fees for using our open channels. This is ideally how, the network would work, hopping from individual to individual until your transaction meets the intended recipient. But it turns out that Sam isn’t as fortunate as us and our channel only as 0.5 Bitcoins deposited. This won’t work. There has to be enough loaded on each channel along the way for it to be used. And the network must find another route. Luckily it turns out that Bob and you both eat at the same pizza shop regularly enough that you both have open channels The pizza shop has plenty of Bitcoin in its channel and is one less hop than the last example. Bob gets paid, less fees for you, and the pizza shop gets a reward for providing a useful service Everyone wins Or so it would seem A problem with the system is the requirement to preload every open channel you have ahead of time, with what you assume will be the upper limit of your spending habits with that channel. It’s more convenient to have one open channel, and a large amount of Bitcoin, to a well connected party, that consistently has more money than you so you can, always route through This is why hubs will naturally occur. A Lightning hub is a node with enough channels open and enough liquidity available. By connecting them, you limit the amount of channels you need to personally open, never have to worry about their balance, and reduce the amount of hops and fees required to make transactions. Unlike miners, who don’t actually transfer value, these hubs will likely be classified as third-party settlement organizations. Being subject to heavy financial regulation laws, such as KYC and AML. Also unlike on chain transactions there is a chance of theft in the system. If another party attempts to broadcast a channel in an old state, they can try to steal your Bitcoin if you can’t catch them in time. For this you will either need to run a full Bitcoin node, that’ll always be online to monitor the transactions yourself, or hire a third-party service to do this on your behalf. So, the Lightning hubs will require to be set up financial regulation and reporting laws Require massive amounts of liquidity to keep multiple well-funded open channels. Offer fraud departments to watch the blockchain constantly and prevent theft. All while taking small fees for every transaction you route through them. Does this system sound familiar? Just replace the term “open channel” with “checking account” These Lightning Network hubs, will be ran by the same financial institutions the Bitcoin was made to challenge. The banks aren’t fighting Bitcoin, because Bitcoin will be the new banking system. Bitcoin needed no middleman, there was no fraud to detect, no permission to give, no transaction to reverse, no fees to collect. So it had to be broken to need them, and the worst part is you won’t have a choice. Either give up your freedom and use the Lightning Network, or be subject to double or even triple digit ever-increasing fees, for every move you make on the Blockchain. The truth is, the 1 megabyte blocks restricting Bitcoin, are purposely kept there by the developers. The absurdly high fees and long waits created demand for a solution and the solution they give us is the banking industry. The block size restriction, was placed as a temporary safeguard by Bitcoin’s creator Satoshi Nakamoto. As soon as the blocks were close to being full it was to be raised again. Satoshi mysteriously left the project in 2010, but before he did he left instructions on how to raise the block size, and left Gavin Andreson in charge of the project. Once Satoshi left institutional money started to make its way in and take control, and a company Blockstream emerged. Over time it happened that a large portion of the development team was part of or hired by this company, and when it came time for another block size increase, there was a portion of the developers that thought this was a bad idea. This just so happened to be the same group of developers that work for Blockstream. The story of how Blockstream took over is a long and strange one, and I’ll have to cover it in another video, but with massive amounts of censorship, organized attacks and manipulation, Blockstream managed to take primary control over the development of Bitcoin and force out any of the developers who opposed their choices, and gave open arms to the ones whose opinions are aligned. Ever since then, the fees have exponentially risen, the confirmation times have have grown from minutes to hours, to days. And the merchants are dropping support at a rapid rate. The block size should have been raised long ago. It could be raised for years without any risk of centralization, giving us time to find other solutions. But it won’t happen, because Blockstream states that they plan to turn a profit by selling side chains to businesses, allowing them to accept custom Bitcoin backchains that aren’t subject to Bitcoin’s high fees, taking small fees for every transaction, fixed monthly fees from the businesses and selling the custom hardware needed to run them. This model is far more profitable if Bitcoin doesn’t work properly. If the fees are low and no one wants their sidechains, then, how will they pay the 74 million dollars back to the corporations and big bankers who have invested?, the ones who benefit from the Lightning hubs. This amazing technology designed to give freedom, stability and power to the people around the world has been ripped apart and destroyed for power, control, and profit. But it’s okay, because we’re going to the moon…

100 thoughts on “How The Banks Bought Bitcoin | Lightning Network”

  1. Hub could run under tor (or another anonymization net) so GTFO KYC/ AML, early adopters have so many coins (to run the Hub) banks can dream of. And true decentralization is when you run a full node ( or "worst case" have a trusted friend doing that). Vers work spotted, pure BS

  2. Decentralization is not a linear process. LN hubs provide temporarily scaling relief. As scalability improves, fees will drop and LN nodes will become less profitable and increasingly irrelevant. Increasing a block size is not the only way to scale BTC. LN is no different to BTC than Uber is to the taxi industry. We need to be realistic and understand this will take time. LN will ultimately decentralize itself out of existence.

  3. For anyone interested in why this is wrong, Andreas Antonopolous has posted both a video and an article that breaks it down. You can find the article here: http://bitcoinist.com/andreas-antonopoulos-6-things-critics-keep-getting-wrong-lightning-network/

  4. A lot of misconceptions in this video!!!! Please don't deceive viewers!!!
    https://www.youtube.com/watch?v=c4TjfaLgzj4
    http://bitcoinist.com/andreas-antonopoulos-6-things-critics-keep-getting-wrong-lightning-network/

  5. So whats to stop another cryptocurrency coming up with a better way to do transactions. People would just move their money into something else.

  6. Ahhhh snap !!!! Andreas Antonopolous just made a diss track against you – https://youtu.be/c4TjfaLgzj4
    *shots fired*

    You gotta hit back at him DT

  7. It’s now becoming increasingly evident that Bitcoin may be a creation of the NSA and was rolled out as a “normalization” experiment to get the public familiar with digital currency. Once this is established, the world’s fiat currencies will be obliterated in an engineered debt collapse, then replaced with a government approved cryptocurrency with tracking of all transactions and digital wallets by the world’s western governments.
    NSA mathematicians detailed “digital cash” two decades ago
    What evidence supports this notion? First, take a look at this document entitled, “How to make a mint: The cryptography of anonymous electronic cash.” This document, released in 1997, detailed the overall structure and function of Bitcoin cryptocurrency.
    Who authored the document? It was authored by “mathematical cryptographers at the National Security Agency’s Office of Information Security Research and Technology.”
    The NSA, in other words, detailed key elements of Bitcoin long before Bitcoin ever came into existence. Much of the Bitcoin protocol is detailed in this document, including signature authentication techniques, eliminating cryptocoin counterfeits through transaction authentication and several features that support anonymity and untraceability of transactions. The document even outlines the heightened risk of money laundering that’s easily accomplished with cryptocurrencies. It also describes “secure hashing” to be “both one-way and collision-free.”
    Although Bitcoin adds mining and a shared, peer-to-peer blockchain transaction authentication system to this structure, it’s clear that the NSA was researching cryptocurrencies long before everyday users had ever heard of the term. Note, too, that the name of the person credited with founding Bitcoin is Satoshi Nakamoto, who is reputed to have reserved one million Bitcoins for himself. Millions of posts and online threads discuss the possible identity of Satishi Nakamoto, and some posts even claim the NSA has identified Satoshi. However, another likely explanation is that Satoshi Nakamoto is the NSA, which means he is either working for the NSA, he is a sock puppet character created by the NSA for the purpose of this whole grand experiment.
    The NSA also wrote the crypto hash used by Bitcoin to secure all transactions
    On top of the fact that the NSA authored a technical paper on cryptocurrency long before the arrival of Bitcoin, the agency is also the creator of the SHA-256 hash upon which every Bitcoin transaction in the world depends. As The Hacker News explains. “The integrity of Bitcoin depends on a hash function called SHA-256, which was designed by the NSA and published by the National Institute for Standards and Technology (NIST).” THN also adds:
    “If you assume that the NSA did something to SHA-256, which no outside researcher has detected, what you get is the ability, with credible and detectable action, they would be able to forge transactions. The really scary thing is somebody finds a way to find collisions in SHA-256 really fast without brute-forcing it or using lots of hardware and then they take control of the network.” Cryptography researcher Matthew D. Green of Johns Hopkins University said.
    In other words, if the SHA-256 hash, which was created by the NSA, actually has a backdoor method for cracking the encryption, it would mean the NSA could steal everybody’s Bitcoins whenever it wants. That same article, written by Mohit Kumar, mysteriously concludes, “Even today it’s too early to come to conclusions about Bitcoin. Possibly it was designed from day one as a tool to help maintain control of the money supplies of the world.”
    And with that statement, Kumar has indeed stumbled upon the bigger goal in all this: To seize control over the world money supply as the fiat currency system crumbles and is replaced with a one-world digital currency controlled by globalists.

  8. If we want to pay p2p with btc we can yeh ? If we want fast micro payments for low fees using a LN AKA smart contract we can yeh ? How is this not good for the up scale of btc?

  9. blockstream established in 2014, after reading this article, you video looks like a FUD! https://medium.com/@whalecalls/fud-or-fact-blockstream-inc-is-the-main-force-behind-bitcoin-and-taken-over-160aed93c003

  10. Cryptos some day are going to need regulations, it can’t be the Wild West forever. And to be honest until we can use bitcoin at McDonald’s it’s never going to be practical. I wouldn’t mind having wallet that’s declared to my ownership. Hopefully if we use hubs they will be able to protect the small guy who doesn’t understand the technology. You shouldn’t need to know how money works for you to spend it, it should just work

  11. The banks didn't but Bitcoin. One doesn't buy something they created and own already. They are just directing you to their local branches from their regional ones. Got your Bitcoin.

  12. Telegram group available to talk about crypto as a community!
    https://t.me/joinchat/HWsy3hJdZmmiZqAMQro_Wg

  13. I stopped watching at 1:10. If you bought $30 of bitcoin and paid $15 in fees YOU ARE AN IDIOT. Also, you paid $15 and had to wait 5 hours? Are you high? It's not Bitcoin's fault, it's your fault. At the peak of unconfirmed transactions when fees where high, I paid a maximum of $1 tx fee. Now I pay a couple of cents.

  14. Ever increasing fees, WHAT ARE WE TO DOOOO……… oh wait, its fixed guys 🙂 low fees again in a matter of weeks…… fast transactions again. What were we worried about again?

  15. This is interesting, because this is a good path to merge our current system and the new crypto system. Outside the dark tone – this seems like a good way forward for now. It seems to me the BTC may be more valuable because if this.

  16. Fuck the banks. Fuck bitcoin. Take your money out of the banks. Buy stuff, REAL WEALTH, that effectively no one can take away from you; buy gold, buy land, buy property. These things will keep their value pretty well, regardless of what the banks do.

  17. This is the sad truth. I wish more people that supported this idea, actually knew what it was.
    I noticed you didn't mention 'the fork' and kept it on topic. Props.
    It would have been nice to let the newcomers know about the 'fork' that resisted this. So the revolution is still alive.

  18. you need to add the fact that blockstream backed Halong DragonMint and burnt everyone who bought into the pre-sales..

  19. Lightning network will utilize smart contracts, attempting to steal money from a tx will result in losing funds

  20. conspiracy of banks really? Yes banks work all really fast together on influencing new tech adoption!!

    LN is a trade off that had to be made for being able to scale. Bitcoin cash also made a trade off by choosing big blocks. Both have issues to be solved.

    I personally think linear scaling (bitcoin cash) is just not an acceptable solution from a science (mathematical) perception, hence community preference goes to higher order scaling like LN.

  21. So long as bitcoin is the reserve, we are in excellent shape. seems like bcash will suffer from the same problems of centralized control, but not protect the coin as well.

  22. I have been watching the BTC vs BCH drama for some time. I own BTC and therefore I WANT to think that everything is good and LN is good. Unfortunately/fortunately I have always been more open-minded than the average human. I continually re-evaluate my beliefs and opinions. The videos I have seen from Mr. DT (Decentralized Thought) make a LOT OF SENSE. I am not a neophyte in this space. Based on this video and other research I have done, I now believe that the Banksters have taken over Bitcoin Core. Sure Bitcoin can still thrive as a Government/Bankster coin. But this is NOT the reason I am into crypto. Check your anarchocapitalist roots and, if you agree, it's time to go in a different crypto-direction…

  23. well the point you make has it place, but human are not racional, if you think that way, wouldn´t you also dislike btc because we have whale that control the most BTC and have power in the community like the system we now have, individuel that influence peolple and controll the cash flow of the blockchain market. Inthe end we can just go step by step and trying to move in the right direction and i think sidechain can be very efficent in the futur and with a littel luck, we may have a more balance economy than now, i hope so.

  24. THIS IS NOT HOW THE LIGHTNING NETWORK WORKS. search jimmy song's (he's a bitcoin developer, not a roger ver sock puppet) explaination on lightning.

  25. They can’t keep this up people will switch to different blockchains. Bitcoin is competition against banks. If banks get out of hand and become too abusive people will all switch to bitcoin. Bitcoin also has competition from alt coins, if bitcoin become centralized and transactions times become to congested people will switch to the next best coin.

  26. How the banks bought btc to open channels and raised price 100x ? Im ok with that 🙂
    Btw no one is forcing you to use LN tx, you will still be able to do onchain tx…
    Or am i missing something?

  27. Your video is misleading on a number of points. Here are three.

    (1) High transaction fees are a result of high transaction volume. Large block sizes are a reaction to high transaction volume. High transaction fees ARE NOT a result of large block sizes; block sizes and transaction fees are correlated, not causally connected. Like ice cream sales and drowning deaths: both rise with hot weather, but it's silly to think that ice cream sales drive drowning deaths!

    (2) Transaction fees need not continue to rise. In fact, the average fee is well under $1 ($0.12 when I looked just now). Why? High transaction fees force (smart) people to go elsewhere, and has also dampened the recent crytocurrency day-trading "tulip craze". Lower volume leads to lower transaction fees. Why? Because the initiator of the transaction sets the fee for the transaction. Why wouldn't the initiator just choose a lower fee? Because miners choose the most lucrative transactions to knit into the next block (they don't have to, but… what would you do?), and therefore transactions with too-low fees languish. Note that the transaction fees that you quote, and even the sub-dollar fees that I quote, are not set by some evil Bitcoin-controlling entity, they are set by transactional demand.

    (3) Not everyone suddenly needs to jump onto something like the lightning network as you imply. A strategy like lightning helps mitigate transaction fees that are too large for the transaction amount in question. If my transaction is $10,000, the transaction fee is not onerous, even with the fees you mention. On the other hand, for microtransactions, one must avoid Bitcoin altogether, or use something like the lightning network to amortize the transaction fee over multiple microtransactions.

  28. Satoshi Nakamoto is a fictional character ,, the real people who created the bitcoin are the elite bankers for the purpose of replacing fiat money once the dollar collapses .
    those who think that the bankers will ever allow the people to have decentralized money are ignorant .
    This crypto was created to enslave , control people and track every dime you spend .
    Sadly though we are helping them enslave us by investing in this garbage

  29. The real question in my opinion is which will work better with the lightning network: Bitcoin or Bitcoin Cash? It seems obvious doesn't it? If Bitcoin gets their way then the network will no longer be trustless, Andreas Antonopolous is scared to say that though it seems for obvious reason: it would shake the entire market cap by 10 billion in a day from all the people who have bought in now, realizing that he was the grand wizard all along, but has been very scheming in his power trip by multiplying his wealth thousands of times I'm sure like only the greatest investors in history are doing. No wonder George Soros's portfolio fell last year.

  30. Wow. the .0001% transaction fees the 'banks' make is sure going to keep the war industrial complex rolling.

    Don't middle-men genuinely deserve some kind of fee, the same way a baker deserves money for a loaf?

    Maybe they do own them, but BTC is one of a host of cryptocurrencies and ICOs. The bank model is dead and buried.

  31. Hey Great Video..
    I only spent 1.4 minutes then I figured well if your comfortable at The Gas Pump Every 3-4 WTF? what's $24.00….in comparison to Overdraft Fees of $36?

  32. They haven't found a way of creating more than 21M bitcoins though have they? If banks and institutional money are buying in that's still a bullish sign even if it is still organizations get paid just for having the money and not doing much

  33. If we went with increasing block size the trade off is less decentralization which is the true heart of bitcoin core. Lightning network maintains that. If we increase the block size in order to scale, mining will never be accessible to regular people. Yes a handful of mining pools dominate right now, but that’s a result of ASIC miners coming into play which are currently leveling off their speed of development and if antpool does something the community is staunchly against then we can all switch pools whenever we want. Bitcoin core is by far and away the MOST decentralized cryptocurrency and lightning network is an attempt to stay true to that. Bitcoin core = 7 transactions per second. Bitcoin cash is scaling with block size increases. They’re at what? 16 transactions per second? We’re competing with 24000 from visa. A different solution like lightning network is necessary and block increases will not be feasible unless we have a light speed leap in computing power available to the masses.

  34. If I open a channel and route it through hub.. How is that a bank… I still have my coin… Also if regular transfers happen through LN.. It will not fill the 1mb blocks so fees will be low

  35. this is FAKE dude, you have the base protocol btc and then everyone is free to build on top of the protocol. when you change the layer 2 (LN) you dont change btc base layer

  36. This was great, I have been researching "usd to bitcoin" for a while now, and I think this has helped. Ever heard of – Zenavid Nenillian Plan – (search on google ) ? Ive heard some awesome things about it and my mate got cool success with it.

  37. How can a few people control the block size restriction? I thought bitcoin was "open" and anyone can develop for it. I don't get it but this makes it sound like it was never decentralized.

  38. on chain scaling isn't a good approach on solving the issue. cause the problem will still occur once they hit the limit of 2mb then 4mb then to the point it gets 1GB even more. and are you fucking insane try broadcasting that huge size of block to the whole network… as the block size gets bigger it gets harder to run nodes for the network to the point that only big corporations/institutions can only run a full node. making it more centralized. And micropayments on-chain is an overkill, that's why Lightning Network is the best solution for this case. BUT YOU KNOW WHAT'S COOL? everybody, everyone has an OPTION, there's no need for 1 currency to prevail. That was bitcoin is all about, it gave as an option. unlike before we are stranded in a closed and bordered currency issued by the government, but in 2008 SN changed that with Bitcoin. so go ahead choose whatever you want, it doesn't matter, you have the freedom and right to do so.

  39. It’s June 2019. LN still not working great. Still almost impossible to withdraw LN on to BTC main chain. Still high fees to open and close a channel. I’ve been a BTC maximalist for 4 years…..now I’m not sure at all.

  40. Hello, I just found your channel and subscribed. Really good stuff !!
    I would like to know more about the possibility of getting Bitcoin stollen by an "old state hub" sou mentioned un 4:55.
    Can you explain in more detail who is it possible?
    Thank you very much !!!

    PS: if you create yourself an account in Telos blockchain I will send you some TLOS tokens. I'm a developer and I'm working actively for this blockchain to succeed.

  41. Lightning network is not practical. It is too complex to be implemented. Many altcoins were created with much better design, much higher transaction speeds and low fees. Altcoins are the future.

  42. If there are regulations such as AML and KYC for these LN hubs, what’s to prevent the same regulations from being imposed on miners themselves? They are “processing” transactions on the blockchain.

  43. I’ve thought about this for a while and I’ve come to the realization that lightning network was inevitable! As far as banks controlling it well they still run your social security and they’re the reason we all pay taxes or random crap so that’s just a lost cause

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