Shower thought: Higher Bitcoin price increases LN's value

At any time the Ligtning Network's utility is limited by the value the channels can carry, which is determined by the amount of bitcoins used to set them up. Currently the channel capacity on most nodes that route payments is somewhere around $25 to $250, which means it's ideal for small purchases like tipping, buying a beer, or even buying a t-shirt. However, we have a lower reliability for larger payments like buying a laptop or renting a car for the weekend, because there are less channels with larger capacity.

However, if Bitcoin's price goes 5x - 10x, suddenly the capacity of the very same channels will increase to anywhere between $125 to $2,500, which means LN will become reliable for larger purchases.

This in turn makes LN and the Bitcoin network in general more useful and reliable giving it more value, which will give the bitcoins an even higher valuation too. It's a self reinforcing effect.

So, as LN spreads Bitcoin's price will actually be a useful metric to measure the usability and reliability of the network, which strictly speaking wasn't the case before LN.

Submitted January 19, 2019 at 10:09PM by binarygold http://bit.ly/2U5CX7z