What are the differences between Bitcoin Cash and the Lightning Network?
Well before we get into that, let me just talk about why I think that I am a good person
to make a video on this topic and
Before I even do that. Let me just say again. I'm in Japan right now
In case you are curious Alex. I work. I have a job that I have to do which is why I travel
But yeah, hey Alex. Good to see you man
I'm kind of ribbing them a little bit. But yeah, this is Japan. It's Uji. It is absolutely beautiful here
It's a rainy day in April right now. I'm gonna be going to the grocery store
And doing some cooking tonight, but I figured I would jump on a little walk and talk vlog talk about lightning network
And talk about Bitcoin Cash some of the similarities and differences between them
So
Why am I a good person to talk about this?
Well first off I have spent extensive time using lightning and using Bitcoin Cash
As you guys have seen in my YouTube channel. I have spent a
significant amount of time in
El Salvador
Where lightning network was used
for
custodial
apps
That pretend to be lightning but actually aren't
Such as Chivo which I've used extensively, but all of these things I've used and played with and
Bitcoin Cash of course I have used and actively used today. In fact, I pay some of my staff
with Bitcoin Cash
So it's a cryptocurrency that I very much enjoy using I very much like
Because frankly it just works and it works the way that money should
All right, so I
Should also be transparent on
Why I am not a good person to make this video
So the reason is I have not personally run a lightning node or a Bitcoin Cash node
I have not mined Bitcoin Cash. I have not mined Bitcoin
But maybe that's something I do in the future
But I just want transparency on that and I actually to be honest, I think that's a good thing
In a way because for me
I'm a user
I'm not technical and part of the reason that I started making videos on my channel about this topic
Was to show cryptocurrency and Bitcoin being used across the world from the perspective of someone who actually uses it
It's very easy. Especially a lot of people who are into Bitcoin
Who get so into the technical side
They never actually look at what it's like for the end user
This is especially true in lightning where so many people in lightning are these engineers
that kind of ignore
How people actually use the coin and why it's a problem and why business people
Like me don't use lightning and can't use it because it's not a good solution
From a user experience point of view, so let's compare and talk about some of the differences between the two I
Would call them coins lightning is not a coin. It's more like the Bitcoin equivalent of fiat
It's like crypto fiat. It's an IOU token, but yeah, I made some notes, so let's take a look
All right, so let's talk about the first which is just usability since I kind of mentioned that already
So I like I've said I've been in El Salvador and I've used lightning
In fact, I had a problem with lightning so I got on a phone call with
serious lightning user
in fact, this guy is a lightning node operator who's extremely technical and
at that time he was being friendly with me because I was
Very open to having my mind changed about lightning in Bitcoin
So to his credit he did a pretty good job in trying to help me and trying to work out some of the problems that I
Was having with lightning and of course I was documenting everything that was going on
While I was in El Salvador while I was on a live call with him lightning kept failing and he just said well
I don't know so go ahead and try scanning this code and see if you can send money to it
The app is so comically slow, it's so slow
Oh, okay, so try sending five dollars
It's not working is it it can't
All right, so there you go. He is not able to send Bitcoin to my wallet does not work
So that is sort of the first difference between Bitcoin cash and lightning which is reliability. I
Have used Bitcoin cash for many transactions many places around the world
online many situations and
In every single case I've ever used Bitcoin cash or Bitcoin for that matter
I've never had a payment fail
never
Which logically makes sense for money if you have money
Let's say that you go to your local convenience store and you want to buy a bag of chips
You open your wallet and you take out a dollar bill and you hand it
To the guy right
Hey
Imagine you do that
But a percentage of time the dollar bill just like teleports out of your hand and back into your wallet
Like that that's a logical but it doesn't make any sense money can't do that money
You can't like fail to give money from one party to the other
Usable money doesn't fail
Otherwise, it's not usable money needs to have a 100% transaction rate
It's like in terms of success a
100% of the time I want to give someone money that money needs to go to them without magic
stupidity happening with Bitcoin cash
That rate is a hundred percent even with Bitcoin BTC even though it's expensive that rate is
100% as it should be
Lightning on the other hand is not 100%
Lightning on the other hand
Not only is not 100% but in some cases
It actively has a lower
percent success rate the more money you're transaction transacting
So if I try to send someone 50 cents, there is a probability that it will fail
If I try to send someone $10 there is a higher probability will fail
If I try to send someone $1,000 it has an even higher probability of failure
And so on
In some cases the probability of failure might be so high
That it is not even worth sending
Now the reason for this is technical
It's because you need to have liquidity between people you're sending payments to and
The higher amount of money you want to send
The higher amount of liquidity is required for every party that your money is going through
Why this is stupid is because for businesses who want to use lightning to transact large amounts
You have less reliability the higher the amount
But actually businesses want to have higher reliability the larger the amount
If I'm selling my house, so my house is houses worth $500,000. I don't want to spend days or weeks
looking for
reliable channels
I don't want to risk opening a node
With lightning
To send that money
With a party who opens a node and they have to have the liquidity enough money to open that node
They have to have a $500,000 to I have to have $500,000 to open it
Then we transact and then God forbid something happens with my computer and my node goes offline and the watchtower
Towers not trusted
That's a whole nother topic. By the way, we're gonna get into this video watch towers
The point is that things can go wrong with lightning in payments, especially in higher amounts
That is not okay
Kai you do
frog
so
Not good not good at all
With Bitcoin cash it works. It works the first time. It works the last time it works at $1.00. It works at $100,000
It works and it works and it works and it works now if you're smart
You're gonna watch this and say all right all that's true
But to be fair you would never use the lightning network to sell a $500,000 house
Right you'd only use lightning for like buying coffee or cheap
transactions and
You are completely wrong
You are completely wrong and the reason is fairly simple
Let's assume that the writers or the writer of the Bitcoin standard
Which is probably the world's most popular book on Bitcoin is
accurate in his
belief that in the future
Bitcoin transactions are going to be like millions of dollars on the base layer to send Bitcoin will cost hundreds of thousands of
dollars or even millions of dollars where it's as
Difficult to send money or as expensive I should say to send money on Bitcoin as it is to you know have an oil tanker
Send oil across the ocean in that case. I'm sorry, but you're not going to be selling a $500,000 house
on
Bitcoin with Bitcoin
It's going to be too expensive even a hundred thousand dollar transaction fee is gonna be too expensive one fifth of the house
sale you have to pay
To transact the money that doesn't make sense
So you are going to be using lightning if lightning is the solution that people use in the future and in that case
You're going to be using lightning
Using custodians assuming there's any custodians that have that kind of liquidity and this is the big problem
Is we can't have a solution for the future of money
That requires huge fees to send
And the lightning network is not reliable to handle large
payments
And really any payment
reliable
You know, there are many people on lightning who talk about sending
Money on lightning multiple times to try to hope one goes through. I've seen tweets about it
Money cannot fail to be transmitted and received
That's a logical next big difference between Bitcoin cash and lightning is
trusted third parties
With Bitcoin cash, you can use it
You can have Bitcoin cash and you can send it to other people and you don't need banks
You don't need middlemen. You don't need people who observe and watch to make sure everything's fair
You don't need government intervention
You don't need
central banks
You don't need an account. You don't need a phone number
You can just have your Bitcoin cash and you can send it to who you want when you want without having any
One else involved. Okay
With lightning all of a sudden
That doesn't ring true anymore
And there's a few ways that lightning fails in that regard. Let's talk about a few
Let's talk about the least dangerous of all. Okay, the least problematic I'd say which is if I have money
And I want to send money to you and we don't have a channel that's open
We need to have someone in between us a
Third party you could say a trusted third party you could say that I send the money to him and he sends the money to you
That's not that big of a deal
unless
you are
Relying on that person and that person doesn't like you for example, let's say you're an El Salvador and you're someone who has a wallet down there and
the primary
Note operator decides that you have the wrong politics and they're not going to transmit your payment outside of El Salvador
Now this is actually more real than you might think
The reason is because the whole lightning model incentivizes
hub-and-spoke
Situations where you have a primary hub a primary lightning node and all the smaller
Individuals transact from that is the future we're moving towards
With lightning so in that case
You have to rely on a trusted third party
Now personally one of the reasons why you get into crypto or Bitcoin in general is
Because you don't have to rely on third parties custodians
You don't have to rely on other people and
With lightning there is going to be some reliance even in the least
problematic
Example where you have just the middle man who's doing the transaction between the two nodes
And he's not evil and he's not trying to silence you. He's just a business person looking to make money
Okay, fair enough not that big of a deal but still kind of weird you have to trust a third party
Now I'd say that this is the least problematic because in theory not in practice
But in theory you can open a node and that person you want to transact can open a node and you can do stuff between yourselves
But again, that's in theory and the problem with lightning in my opinion and the people who support lightning is that
They're all theory mongers that aren't based in the real world. The real world is that that is not how it happens
The real world is most people do not have the
Money to open liquidity
Especially if they're in El Salvador and they're on lightning
And they do not have a technical ability
Blah blah blah blah, okay, let's get up to more challenging versions of lightning in terms of its
ability to not work with the third party which is
Watch towers
So with lightning if I open a channel and you open a channel and we transact
One of us either of us can close the channel
And that's all well and good
Problem is that when I close the channel it's not closed with necessarily the right amount
So put it like this
let's say that we transact back and forth we open a channel and
It's for ten dollars and I send you nine dollars. So now you have nine dollars and I have one dollar
Well, I can close the channel and say that I actually have ten dollars
Because I open the channel of ten dollars
Well, that's a problem
Because if I do that I just stole your money
Now there's ways at the lightning that work tries to reduce that for example if
you
Say hey actually you owe me nine dollars, and that's the most recent and you
Tell that to the network within two weeks then not only do you get the nine dollars?
But actually I get punished I get punished so you get all the money in that channel if I was dishonest
the problem is I
Have no real incentive to be honest if I already was gonna have no money anyway from that channel when it closed
So the solution to this is watch towers
Watch towers are other notes that watch our notes make sure that our notes are being honest
Now you have to trust a watch tower note that our notes are being honest
Where this gets really problematic is again if we're talking about large amounts of money
And you have to trust a third party
You see where this is going the whole point of Bitcoin coin is not trusting third parties and if the watch tower node
Doesn't like you because you have the wrong political opinion. That's not good
Bitcoin should be trustless. You should not have to rely on anyone
So I could have even gotten into more details about how if your computer goes down
Then it's even impossible for you to catch the other person being dishonest in their note
Projecting the wrong putting out the wrong information again. You have to rely on a watch tower
Which again is all about trusting a third party
Okay, so not good not a good scenario
Finally and the most important when it comes to lightning network is
Liquidity if you are an El Salvador and you make 50 cents a day and
Bitcoin is the money of the world
And you have to use Bitcoin you can't use the odd or any other system
You've got a problem now because if you want to use your money and you don't have much money
To open your own note is extremely expensive. You have to free fund the liquidity for it
Or you have to do what people will actually do
Which is rely on custodians
Now here's the thing
There is a difference. There's a very important difference
between relying on a custodian
Because you can afford
financially
To be independent from relying on a custodian
Because you are a newly user and
You don't technically know how not to rely on a study you understand why that's different
That is a massive massive difference the truth is most people in crypto whether it's Bitcoin cash or Bitcoin or whatever
will not want to
Use non-custodial they don't want to have to worry about losing their keys, you know, whatever and that's fine
That's okay, that's choosing a more simple streamlined solution because
It's technically easier
And you have lower risk of losing it although you have higher risk of a custodial stealing
But lightning is different
Because unless you have the money to seed your liquidity, which most of the world does not
You have to use a custodian even if you don't want to even if you technically can do it yourself
You don't have the money to
That's a different dynamic that's a predatory dynamic totally different situation
And that is why
Lightning the Bitcoin cash are totally different lightning almost guarantees that the most vulnerable people must use
custodial solutions
It's exactly what you see in El Salvador
The most vulnerable people down there that use lightning or use Bitcoin are relying on the El Salvadoran government
which is
Just insanely
Problematic in so many ways and you can watch my documentaries to kind of figure that out
I'm gonna go and get some dinner, but uh, we'll keep talking after I come back up
I got a really nice meal. I'm doing it niku-jaga
Just like a potato meat stew. So I got Wagyu beef potato
onion garlic a whole bunch of stuff and I also got a snack while I walk which is a tofu bar. I
Know it sounds weird, but it's absolutely delicious
I'm probably gonna offend some Japanese by eating it. You're really not supposed to eat walk
And me blogging at blogging at the same time
Right
Let's talk next about scalability the difference between
Lightning network and Bitcoin cash in terms of scaling and onboarding the world to a new form of money that separates
The state from money just like we separated church and state let's separate state and money
So can the lightning network do this can Bitcoin cash do this?
Well, let's answer the question very very simply
Yes, Bitcoin cash can do this Bitcoin cash can scale to be the money of the world fairly easily
and
Bitcoin
What about the lightning network? Well, let's answer that question with looking at some very specific numbers numbers that are
Coming from pro BTC lightning
Proponents these aren't from people who disagree with lightning. All right, first off
To get people on to lightning you actually have to get them on to lightning and that's a problem
The reason that's problem is because there's a lot of human beings on planet earth
As you might be surprised to learn and the Bitcoin network has a one megabyte
More or less one megabyte lock cap
So to get people on to lightning. We need to fill up those blocks
So here's what the math breaks down and tells us if 90% of every bit point
Every 10 minutes is used to onboard people onto Bitcoin's lightning network
We would be able to get approximately
0.85
0.82% of the world's population onboarded every year
About 66 million people
Hmm now Bitcoin network
Has to be renewed. So what that means is that by the time we get through 0.82% of the population
After one year
Lightning that work is basically renewed nodes go down and go back up
Everything gets refreshed and we would lose everyone on the Bitcoin network and have to get them back on
meaning
We can only have 0.82% of the world's population on the lightning network at any given time
This is a limitation that's in the Bitcoin lightning white paper
This is something that they knew about from the beginning. This isn't a surprise at all
That's a problem they knew
So how big would the Bitcoin blockchain need to be to accommodate people the actual world using lightning?
144 megabytes block size
133 pretty close
So we would have to raise the block size limit of Bitcoin
133 times to get it functional enough that the lightning network could be used. All right, I'm in Fukuoka
and the video is jumping at this part because I
lost footage of
One of the points that I included in my list of Bitcoin cash first lightning. So let's get back into it
Here is the next topic
Which is cold versus hot wallets
in lightning versus
Bitcoin cash
This is an important one. This might be the most important topic of the entire video
Even though it seems not that important. So first off, let's define what I mean
What is a hot wallet? What is a cold wall?
put simply a hot wallet
It is sort of like having a wallet in your pocket
Okay, I will wall it with me here
Any cash that's in that wallet is hot
Okay, I lose my wallet if I drop it if I get picked pocket that money is gone
Now money that is in my safe at home. That would be a cold wall. That's harder to access
It's not something I always have on me
So it's the same thing with trypto
So when you have your phone or your laptop that's connected to the internet
That is a hot wallet any money that's on your computer because it can be more easily
targeted by hackers
Now
Cold wallet is where you do not have a device that has the money on it connected to the internet
There are some other examples, but that's sort of a simple way to explain it
Now, I know what you're thinking. Hey, Mark. We're in 2024 2025
Our hackers really a problem
Yes
Yes, yes, yes, and yes
So here's a very specific and real example of exactly why it's such a problem to have your money on a wallet
So I had my
Laptop with me and I went to open it and open my wallet
Exodus at an airport
public airport Wi-Fi and
A hacker got into it and what makes it so scary is
Not only did a hacker get into it, but they managed to get into my treasure treasure is like a key
You can't send money out of your device unless you plug the key into your computer
So I had plugged my key in
And when I went to send the money just a small amount
It makes you confirm twice so I confirmed the first time and then when I confirm the second time you have to hold it down
And wait a couple seconds
The second I touched it the second time and held it down
The address and the amount changed to be my full balance to the hacker's address
And I was able to get my finger off quick enough that didn't send
And guess what I have it on camera
And you're gonna see just how incredibly dangerous it is to have any significant money
on your hot wallet such as a phone a laptop anything that's connected in any way to the internet it is
brutally important that you understand just how dangerous this is and how at risk any device connected to the internet is no matter
What precautions you take even like a treasure or key we think
Mark's wallet has been compromised
so he has a treasure and
it's connected to his computer and
When he attempts to send one bch
Right at the very last screen
it switches the address and
The amount right at the last prompt and we're gonna try to capture this on video
So here's the address
It ends in tqa5 go ahead and try to send one bch. Okay, let's send
Send okay, and now okay watch this so soon as I hit the check it's gonna change it watch
There look it changed it look at that one bch turned into that and notice the address is different
So if he hits
Confirm his entire um, that's fucking crazy, bro
So, I mean you saw it firsthand. Can you believe it? That is how risky it is to keep money on a hot wallet
It's no different than walking around a you know more
touristy area of like Rome with your entire life savings in your pocket. It's not gonna end well for you
So here's where this comes into lightning and into Bitcoin cash
With Bitcoin cash you can have cold wallets
Simple you don't have to have a wallet that's connected to the internet
with
Lightning you do with lightning in order for the lightning network to work if you have your own node
Your device has to always be connected to the internet
Meaning it's vulnerable and
If you take it off the lightning network, you are gonna have to pay huge amounts of money
To get it into a cold wallet
Okay, that's why this is so bad if you trust a custodian which we've already gone through in previous points
This isn't a problem, but then you have a bigger problem on your hand
If it's your own money on your own node and your own device
You always are connected to the internet and while good internet practice like not connecting to a public Wi-Fi
Can help it doesn't mitigate all of the problems
This is really really really dangerous and really important to understand that if you have lightning your money will not be as
Secure as if you have it in Bitcoin
But if the fees to send Bitcoin on chain are hundreds or thousands or tens of thousands hundreds of thousands of dollars as
People in Bitcoin want them to be they want the fees to be that high
Then your money will always be at risk unless you trust a custodian and guess what that's even more risk
Okay, it is not good
horrible horrible horrible
this alone
This point alone makes lightning
Completely irrelevant for being a substitute for money. Okay, let alone all the other points with lightning
You will rely on centralized nodes
Because you need to have liquidity. So if I want to send money from me to you
Especially if it's a significant amount of money, we're gonna have to rely on large payment nodes the same as like
The lightning version of PayPal to transmit that
And that's great and dandy so you realize that large centralized companies like to ban people
Such as PayPal
In stride and all these companies that ban people for having the wrong political views
Or ban people for arbitrary reasons or even non arbitrary reasons. Okay
Banning people off a payment network or what's worse is if any of these large nodes gets
Attacked by a central government which can regulate large companies because you have to understand in order for a lightning to work
You have to have nodes and liquidity and the only people that have enough liquidity
To deal with millions of dollars of Bitcoin being transferred between lots of different people across all the lightning network
going to be large companies that have the
infrastructure
So the nodes don't get down and that way their money doesn't get stolen
Right they have to keep the nodes online all the time and have all the computer infrastructure for that
But on top of all of it. They also need to have the liquid
Bitcoin liquidity to fund it all. Okay, and those are gonna be large very large easily easy to regulate
companies
regulate by the government companies and
When those governments apply pressure
It breaks. Okay, and if one of these large nodes or a few go down through regulation or through
Regulation or through hackers or anything if these large nodes go down the entire payment infrastructure
Of the entire world would collapse
We cannot have a payment system with the vast majority of the world
Has to worry about the infrastructure collapsing because there's no liquidity
Okay, because a centralized node that can ban people and be regulated by the government goes down
It's not decentralized. It's not peer-to-peer electronic cash. It does not solve the problem of scaling
In fact, it makes it makes it substantially worse
So there we go