Oddbean

How can you make risk-free, legal, no-KYC money? Anyone can buy Bitcoin and hope it goes up. But what if you can capitalize on a unique arbitrage opportunity involving Bitcoin Lightning vs On-chain, that reduces your risk to near zero, while having a clear-cut catalyst to rocket your profits to the moon? Does this sound like a scam? Well, this article isn't selling anything. It's free for you to read these clever words, and I get no benefit if you use the idea or not. In fact, because this privacy website can be viewed without JavaScript on Tor, I won't even know if you clicked it. Clearweb: https://simplifiedprivacy.com/risklessbitcoin/ Tor Browser Onion: http://privacypkybrxebcjicfhgwsb3coatqechwnc5xow4udxwa6jemylmyd.onion/risklessbitcoin/

If the #Bitcoin fees increase indefinitely, Lightning will no longer be needed in its current form. There will be new solutions. New solutions to make transactions efficiently. Side note: A short in FIAT has other risks that should certainly be considered.

I don't know that it's risk free. There is risk to keeping payment channels open, there's the risk that your node goes offline and the counterparty closes the channel. Even with that risk though I do think LN BTC is worth more than on chain BTC, but only up to a point: the value difference between LN BTC and on chain can only go as high as the fee disparity, and probably not that far due to the risk I mentioned above. And ultimately, channels have to be closed eventually, which can be looked at in 2 ways: that either that added third fee for closing the channel makes BTC on an unclosed channel that much more valuable, or on the other hand that ultimately for finality the LN BTC has to price in that cost and therefore is worth *less* than on chain BTC that has already borne that cost. My write up you referenced talks about how ultimately fees break the store of value use case and collapses the value of BTC, and I think that LN BTC wouldn't fare well in that scenario because ultimately it's only secure because it finalizes on the blockchaim eventually. All in all, any arbitrage opportunity requires those 3 fees to be paid (the two you outlined, moving from exchange to wallet, moving from on chain to a payment channel and the one I mentioned, the impending cost to close it) and so those fees would eat up any arbitrage opportunity. The only real way for there to be one would be if the privacy and speed of LN alone justified the price premium. As far as the political side of the article, political instability does affect perceived value of fiat currency, this is empirical, I don't foresee the supreme court going the way the article speculates.

Yes, you raise a good point on the nodes and the risk of the trade being settled. However, the risk of a pre-mature settlement could be argued as a further risk for market makers to drive up the value of the lightning/on-chain spread. Regarding the fees breaking the store of value case, this is a valid criticism of our thesis. If the investor believes this is a possibility than Monero would be a safer bet or physical gold. Or keeping on the Short BTC via futures as per the article. History has shown this to be true such as 2017, but innovations with lightning may change the result. As far as which way the Supreme Court goes, it could go either way yes I agree the case against Trump is weak and not really withstanding of the law… but if you think Trump will be on the ballot and win, then you’re betting AGAINST the Deep State. Which has a bad track record for domestic elections.

"We argue that in the future, Lightning will likely rise in price in comparison to on-chain Bitcoin." Why do you think so? #Bitcoin on #LN is "cheaper" to buy at most exchanges that support both layers. Let's say, you buy $100 worth of sats at Kraken. If you withdraw over LN, it's #free, if on chain, you pay $1 (?) fee. It means, LN bitcoin is about 1% cheaper for you. Why will this change? If LN bitcoin becomes more valuable, large companies (banks) will see the opportunity and become custodians. More competition will push the "price" to the on-chain level. Another L2 or a sidechain like Liquid will be competing as well, some people even use Liquid to get cheaper LN liquidity than going directly already.

Right, we agree with your analysis that Lightning is cheaper to get right now due to withdraw fees and this is why it has more utility and therefore value in our eyes. Please read the rest of the article on how this can diverge in price from market makers such as Kraken.

I got it, in your scenario the #dollar become shit and #Bitcoin will shoot up. The main chain fees will be over the roof and people will prefer #LN. But, it doesn't mean, LN sats will be more expensive. Like I'm not going to swap ALL my corn from on-chain, most people won't. We will earn and use LN and #Liquid sats, while treat on-chain as a savings account. Let's say I earn/save up 1 #BTC on LN. Now, the on-chain BTC costs only 0.8 BTC. What will I do? Buy that shit straight away. The price will get to the same level because most of people will be willing to do so.

For large quantities like 1 whole bitcoin sure. As the price of Bitcoin rises to the moon, the threshold for the size of the quantity you'd want to do that with will increase. This would price the average user out, who has never touched 1 full BTC, and make it predominately market makers who'd charge a premium above pure conversion cost. Therefore, we argue that investing in Lightning now, at the same price as on-chain to arbitrage it is low risk with a decent chance at payoff.