Reflections about Lightning wallets shutdown \ stacker news ~lightning

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Reflections about Lightning wallets shutdown

2036 sats \ 10 comments \ @Rsync25 14 Sep lightning

Recently, non-custodial wallets such as Nayuta wallet, 10101 and Mutiny have come out publicly to say that they will close their operations, and in the recent episode of Kraken closing payments via Lightning, due to MiCa regulations.

Because of this, I was wondering if Lightning is going through regulatory pressure or if there are other factors, which I am unaware of.

So, let's look at some points:

What these wallets have in common are the LSPs that they need to use, such as Voltage or their own setup, such as what happened with 10101 and Nayuta.
In the case of Mutiny and 10101, they used LDK, while Nayuta used LND.
Wallets need companies that are susceptible to regulations, very different from FOSS projects such as Zeus and Electrum.
We need more LSPs, even if they are in small nodes, thus managing liquidity.
What caught my attention in the Nayuta wallet announcement is "The Lightning Network, which was initially developed for real-time payments of “decentralized money,” has currently evolved into a business landscape where currently custodial LN solutions are taking center stage." This is still a reality, the vast majority of wallets are centralizing and becoming custodial, bringing risk to the user and developers.

Conclusion

We need to decentralize LSPs, in the sense of accepting small nodes, anyone can be one by following the Darthcoin guide and thus promoting decentralization, payments and much more.

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192 sats \ 0 replies \ @leo 14 Sep

How much of this is due to lack of interest from users and investors in Lightning? Not trying to be negative or a doomer, but from my own experience it's very easy to get people to talk about these things (like we do here), but very hard to get anybody to use anything. And even more difficult to get anybody to invest

970 sats \ 3 replies \ @justin_shocknet 14 Sep

ooh I have some insights on this topic...

if Lightning is going through regulatory pressure

Quite the opposite in the context of the US, which is often cited as the big scary regulator and the market where most funding and users come from... and where other wallets left App Stores...

Just a few months ago, basically every regulation for the last 40 years was voided: https://www.scotusblog.com/2024/06/supreme-court-strikes-down-chevron-curtailing-power-of-federal-agencies/

The 3 wallets you mention said nothing of regs and actually offered up other rationale.

The only reg related activities were Phoenix and WoS pulling from the app store, both pre-Chevron, and both were cases of speculative compliance... not pro-active. Literally the weak men create hard times meme.

10101

Love this team, they were my Wolf pack-mates and some of the most talented builders in Bitcoin. I think their product was a unique case, being an extremely difficult to build technical solution for a problem that's mostly philosophical, not real-world compelling.

With venture capital dried up I think their decision to pivot now is better than later, I can't imagine how'd they'd get funding for additional runway to pursue it, short of an acquisition by a big exchange looking to hedge their operations.

Mutiny

Another talented team despite my critiques of their architecture choices and ex-CEO. Bad architecture combined with dried up venture capital and no obvious monetization paths made pivoting now a prescient move IMO.

Nayuta

Their announcement cited an illness as a key factor, prayers up that turns around.

The illness combined with some of the same factors above (dry vc's and no monetization path) probably left them little choice.

"a business landscape where currently custodial LN", I think this is where a lot of LN projects get themselves on the road of bad architecture choices. Did people really think payments weren't going to be mostly a business tool? Like, who do you make payments to? Businesses, duh.

IMO this is kind of blaming users for their poor architecture choices, it's only centralizing towards custody because that's how it's been distributed.

LSPs that they need to use, such as Voltage

Voltage recently announced shutdown of their LSP too, not citing regs, but as a misallocation of capital. We had Voltage LSP wired into Lightning.Pub, and it was by far the cheapest option for small channels.. I was obvious to me that it wasn't sustainable because they had to be losing money on those channels, sure enough it was only live for a few weeks before they announced.

I'd chock this up mostly to dry vc's and no monetization yet again.

Zeus

Zeus is a commercial effort (Olympus LSP) with FOSS components (distribution) that charges sane amounts for its LSP service. Evan has also been clear he won't engage in speculative compliance, that Zeus and Olympus are compliant today.

We need more LSPs

Yes, unfortunately though I think being an LSP is a bad business. It's extremely capital inefficient.

It's also bad for the network to have them so centralized.

The Lightning.Pub solution to the centralization and monetization problems, if you can't see them yet, will be more clear in time. Time is the key factor, all the bad architectures around us are a result of high-time-preference... It's still possible that one will visit our cathedral, but at least it will be standing if they decide to.

17 sats \ 2 replies \ @Rsync25 OP 14 Sep

The 3 wallets you mention said nothing of regs and actually offered up other rationale.

I know, I used them as an example of reflection and my observations.

The Lightning.Pub solution to the centralization and monetization problems, if you can't see them yet, will be more clear in time. Time is the key factor, all the bad architectures around us are a result of high-time-preference... It's still possible that one will visit our cathedral, but at least it will be standing if they decide to.

True.

17 sats \ 1 reply \ @Rsync25 OP 14 Sep

It's also bad for the network to have them so centralized.

Therefore my main objective is to encourage users to use medium and small Nodes, having less centralization.

100 sats \ 0 replies \ @justin_shocknet 14 Sep

Bingo, and that's part of the reason I take such offense to the scaling argument... we can literally have a billion lightning nodes = a billion LSP's, but the scaling people want to gaslight people away from nodes.

18 sats \ 1 reply \ @DarthCoin 14 Sep

Lightning is going through regulatory pressure or if there are other factors

No. Lightning itself have nothing to do with these apps shutdown. Also each one of them had a different reason to shutdown and not related with LN itself.

On this aspect I would remind to all @roy words about LN:

but I understand your concern... no worry Bitcoin LN will not gonna go away. I've seen many other wallet apps shutting down, these are not the only ones and not the last ones.

0 sats \ 0 replies \ @Rsync25 OP 14 Sep

No. Lightning itself have nothing to do with these apps shutdown.

I know.

but I understand your concern... no worry Bitcoin LN will not gonna go away. I've seen many other wallet apps shutting down, these are not the only ones and not the last ones.

Yes.

0 sats \ 0 replies \ @BTCLNAT 15 Sep

So we are faced with a conflict of interests. On the one hand, more Lightning nodes are needed, but these are not profitable.