This isn't so much a detailed post as a stream of consciousness from an interaction I had a few weeks back that got me thinking. I'm blogging about it because I'm trying to follow Scott Hanselman's rule of never emailing information you can put at a URL.
Bitcoin has been a hot topic over the last year or so because of the meteoric rise of the exchange rates between dollars and cryptocurrencies (although it's been on a downward slide as of the time of this writing). As a result, people have been jumping at the opportunity to not just invest, but to find ways to get something for nothing. This isn't to say that Bitcoin mining is free, and you're not expending resources. It's just a statement on the fact that many novices jumping into cryptocurrency don't understand the substantial electricity overhead of proof-of-work mining.
Mining itself--even for less popular cryptocurrencies like Litecoin and ZCash--is nearly impossible to accomplish on your own, even with a high GPU computer. Most people mining cryptocurrencies have not only purchased specialized mining hardware, but have also joined mining pools--groups of individuals who pool resources to mine together and share on the rewards.
While perusing Twitter a few weeks ago, somebody that I follow posted a photo of his mining rig with the intent to mine Ethereum for profit (and probably some smart contract experimentation). I chimed in mentioning that instead of mining, maybe he should set up a Bitcoin full node, and start experimenting with a Lightning node layer on top of that, which can collect transaction fees.
It wasn't long before I received a DM in my Twitter app, asking about what I meant by a Lightning node. I took the time to reiterate the difficulties of mining cryptocurrency because of the need for high GPU resources--unless one wants to be totally dedicated and spin up some miners in Iceland or Western Seattle. What Bitcoin needs more than anything is for people to spin up Bitcoin full nodes to ensure enough decentralization. You can't collect transaction fees on a Bitcoin full node, so you're doing it out of the kindness of your own heart, but if you layer a Lightning node on top of that, it's possible to collect transaction fees there if you wanted to.
The Lightning Network (which is just now coming into MAINNET usage) is set make a huge splash on the cryptocurrency scene, and there are a lot of good things coming out of Lightning Labs at this time. If the idea is to passively collect cash from Bitcoin transactions, it would be better to run Lightning nodes unless you have a full commitment to expensive hardware. If the idea is to build applications on top of Ethereum using smart contracts, then it might be a good idea to look at all the great stuff being built on top of the Lightning Network.
Ultimately, I feel like 2018 is going to be the year of Lightning. The Lightning Network has the opportunity to reduce Blockchain transaction traffic, which will reduce the ecological footprint of proof-of-work mining, speed up transactions, and drastically reduce transaction fees by using off-chain payment channels. On top of that, Lightning can support multiple cryptocurrencies, and companies are already experimenting with cross-chain atomic swaps. The future could see you being able to pay for a product listed in Bitcoin, but with Litecoin funds as the Lightning Network performs the exchange for you.
What we've seen so far from Bitcoin, Blockchain, and cryptocurrencies in general is just the start of an evolving technology, and the applications that get built from either smart contracts or the Lightning Network are going to be fun to keep an eye on.
Photo by Tobias Van Der Elst