The main loophole discussed in the article is about the liquidity of the hubs. From that, many problems may arise including:
- Inability of new users with zero funds to start with to open new channels in a hub because of the expensive fees
- Vulnerability to sybil attacks that attempt to destroy the liquidity of a hub. This might be possible since there are people who really hate Bitcoin. Doing KYC to monitor user actions in a hub might take away the decentralization and privacy purposes of crypto.
- The high amount of money required to create liquidity to new hubs. Who will be willing to open accounts worth millions and billions of dollars in a hub?
I may have missed out some points the author wanted to highlight in the article. But Failsafe offers one simple solution to answer all of this existing problems. You may just read the last part of the article. I'll quote it in here.
"But is there hope?
LN/Raiden incentive model is hopelessly broken, but it’s not a game over. The fix is ridiculously simple.
Introducing Failsafe Network
The hub can give a signed promise to Bob (positive delta +10) for every commitment they receive from Alice (negative delta -10). Alice can settle whenever she wants (normally when positive delta is reaching 100x of current onchain fee, eg $1,000). A positive delta is not exactly custodian balance, as it’s possible to enforce the hub to pay you onchain as long as the hub is solvent.
Sure, you don’t have 100% security for 100% of your money, there’s a trade-off to be made.
But it’s a lot more important to keep first layer lightweight and bandwidth requirements as low as possible than going full Bitcoin Cash like newer blockchains promoting “100,000” tps do.
Those who sacrifice first layer aren’t real blockchains but scammers who edited a single line of code that limits blocksize.
In Failsafe you get 100% security for 99% of your money (collateral) and 99% security for the other 1% (money in-motion, positive deltas). As long as sum of all deltas stored by a hub is <0 (more money owned in negative deltas than promised in positive deltas), the hub is solvent.
Once it gets insolvent, it will be apparent fairly quickly as it stops settling collateral on time, and people would migrate to other hubs."
sorry I didnt get very far with that article. "How the hub pays to Bob? An on-chain channel to Bob is a pre-requisite to routing any payment." the author assumes that everyone needs to use lightning in order for it to work. this is not true. Lightning's value is that it significantly reduces the traffic of all transactions, so even if you dont want to use it, you will benefit from its effects. the situation right now is the evidence. you may send a non-lightning transaction and get it through with $0.2 USD in the next block.
Yes, if there is no incentive to run and join a hub and if the BTC transaction costs are as cheap as today, not many people will be interested to use the LN at all. I also think that Lightning Network is a great tech but for it to achieve its true potential, many people should be able to use it.
This is the same exact words of the author of the article that I linked:
"So it will not work?
Yep. When it will be released, no one will give a shit. A few enthusiasts will install it, play around in testnet, run “simulations” but that’s about it.
As a user, you will have no reason to open a channel to anybody, no one will have an incentive to open a channel to you, and no one will have an incentive to run a hub to join you guys together. Stale mate.
Don’t trust me? Fine. Wait 3–6 months and see it yourself."
From what I have understood, the author is not proposing a replacement to the Lightning Network but rather an additional feature that can help monitor and maintain solvency in a hub. In this way, more users will be encouraged to use the Lightning Network as the main channel for micropayments.
I mean if he wants to add additional feature then go for it. no one is stopping him. but I have a problem with his words "When it will be released, no one will give a shit. A few enthusiasts will install it, play around in testnet, run “simulations” but that’s about it....Don’t trust me? Fine. Wait 3–6 months and see it yourself."
the current situation is the opposite of that. LN has cleared all the mempool.
I think Failsafe is intented mainly for the skeptic people to gain more trust in LN. But the way the author said it is not the proper way to encourage LN developers to adopt Failsafe.
Yeah LN provided an extra lift. The decreasing number of transactions added to the mempool per day (perhaps FOMO'ers starte to lose interest on crypto when they saw BTC price drop to 6k and also because of LN drastically reducing the no. of transactions on the main net), increasing SegWit adoptation, and larger block sizes also contributed to the decongestion of the network.
https://blockchain.info/charts/n-transactions
http://segwit.party/charts/#
Anyway, thank you for your time to discuss with me on the matter. I hope you are having a great day. :)