Bitcoin could be poised for outsized gains if recent technical signals are to be believed.

Investors have been searching for a bottom to bitcoin since the cryptocurrency lost more than 60% of its value from the all-time high of nearly $69,000 it hit in November. Nearly $2 trillion has been wiped off the entire crypto market in recent months.

A measure of activity of bitcoin miners could give investors a clue as to where the digital currency is headed next.

Miners validate transactions on the bitcoin network using highly-specialized and power-intensive computers to solve complex mathematical puzzles. They are rewarded in bitcoin for their efforts. As more bitcoin is mined, solving these puzzles becomes more difficult.

During market slumps, a depressed bitcoin price can make it unprofitable for many miners to continue operations. They then sell some bitcoin to keep afloat. But they also turn off their mining rigs to save money.

That has happened in the latest market slump and can be demonstrated by "hash rate," a measure of computational power used to mine bitcoin. Since mid-May, when the market really started to sell-off, the 30-day average hash rate (a monthly average value) fell more than 7% and at one point saw a 10% dip. That signaled that miners were turning off their machines.

Hash rate, studied in various ways, is used by crypto investors to try to figure out when the market might bottom, because capitulation and a shakeout of the miners is often associated with the late stage of a bitcoin cycle.

"Historically speaking, capitulationin the mining market has tended to correspond strongly with overall market bottoms," Matthew Kimmell, digital asset analyst at CoinShares, told CNBC via email.

Following on from this, Charles Edwards, founder of quantitative crypto fund Capriole Investments, came up with the idea of "hash ribbons" in 2019 to identify buying opportunities for bitcoin.

When the 30-day moving average for hash rate dips below the 60-day moving average, this is called a bearish cross, and signals that miners are shutting down machines. Usually selling is associated with these events. As more miners are taken out of the market, the difficulty of mining bitcoin reduces because there is less competition.

Because of the reduced competition, more miners may re-enter the market and a recovery may occur.

"These 'capitulations' are painful events for miners within the ecosystem," Edwards told CNBC.

But using Edwards' method, when the 30-day moving average for hash rate crosses back above the 60-day moving average, the worst of the miner capitulation tends to be over.

When this happens along with the 10-day moving average price of bitcoin going above the 20-day moving average price, then this is when a "buy signal" flashes, according to Edwards.

He said those crosses occurred on Saturday.

In the past, buying bitcoin at these points would have yielded strong returns depending on how long you held the cryptocurrency for, according to Edwards.

For example, purchasing bitcoin at the buy signal of August 2016 would have given an investor a more than 3,000% return if held to the peak of December 2018, which was at the time when bitcoin hit a new record high.

More recently, buying during the recent buy signal in August 2021, would have yielded a more than 50% return if bitcoin was sold at the November 2021 record high.

"I created Hash Ribbons in 2019 as a way to identify when major Bitcoin mining capitulation had occurred, as once recovery resumes from these events, they typically markmajor Bitcoin price bottoms," Edwards said. "Historically, these have been great times to allocate into Bitcoin, with incredible returns."

Kimmell from CoinShares said that the logic behind the buy signal is that if the bitcoin price "tends to steadily outpace hashrate before a period of high price growth, then a trending rebound in hashrate," marked by the 30 day moving average for hash rate crossing above the 60 day moving average, it "may mean the rebound in bitcoin price has already begun."

"I find this metric should not be solely relied upon to make an investment decision, but can certainly be helpful if coupled with a suite of other metrics and qualitative evidence," he added.

CoinShares has put together a graph to show the correlation between hash rate and the bitcoin price. And it is split into areas where there is "gold rush" as bitcoin's price rises, and a subsequent inventory flush and miners' shakeout as the price declines.

In a chart provided to CNBC, CoinShares suggests that the market is currently in the shakeout period which typically precedes rebalancing and a rally in prices. Right now, according to the chart, the bitcoin price line is below the hash rate.

The graph shows the movement of bitcoin hash rate versus bitcoin price at different stages in the cycle.

CoinShares

But this could signal a bottom is near, according to Kimmell.

"It is impossible to say if we have reached full capitulation, however there is evidence we are in the phase of the mining cycle where capitulation most often occurs. Secondarily, if previous cycles carry predictive power, then yes, bitcoin price steadily outpacing hashrate would likely precede a period of high price growth," Kimmell said.

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, holds a similar view.

"I think we have seen broad signs of capitulation given the events in the previous months. Hence it is likely we could have the beginnings of a bottom being formed. Usually bitcoin consolidates in a range for a whole which indicates accumulation, which is what we may be seeing," Ayyar told CNBC via text message.

Bitcoin has been trading in a tight range of around $18,000 to $25,000 since mid-June.

However, there are risks that these indicators do not prove as positive as they have been in the past because of the broader macroeconomic environment.

The current global economy is in a very different state versus previous cryptocurrency cycles. There is rampant inflation and rising interest rates globally, aspects which have not been present before.

Risk assets such as U.S. stocks, and in particular the Nasdaq, to which bitcoin is closely correlated, have seen a big sell-off this year.

"Of course all this is still based on historical similarity, and we are in a different macro environment," Ayyar said.

"The major risk remains the economy and inflation, but even then we are closer to an inflation peak than not, and hence this also shows that on risk assets we are closer to a bottom than not."

Read more:
A closely-watched bitcoin metric is flashing a buy signal that has historically led to huge gains - CNBC

A crypto winter is here but it's going to be a "warm winter," according to one crypto bull.

Bitcoin may have fallen by more than half from record levels, but "there's so much more than that," said Edith Yeung, a general partner at Race Capital.

"In some sense, the 'warm winter' is basically going to push out everybody who really [wants to be] there for short-term gain," she told CNBC's Street Signs Asia last week, highlighting that cryptocurrency is a long-term play.

The term crypto winter refers to a prolonged period of depressed digital coin prices in the market.

Cryptocurrencies have lost around $1.9 trillion in value since the height of a massive rally in 2021.

Bitcoin, the world's biggest digital coin, is about 68% off its all-time high of nearly $69,000 in November.

Yeung said she remains bullish long-term on digital tokens because its appeal lies in the fact that "crypto is really about Web3."

Web3 has become a buzzword among those in the crypto industry. Proponents say it's the next generation of the internet, one that is "decentralized" and not owned by a few big technology giants.

Advocates suggest that crypto and blockchain technology could be a big part of that. For example, a Web3 service may run on a particular blockchain such as ethereum or solana. Users may be required to hold tokens associated with those blockchains in order to use a particular service or even have ownership in that app or company.

"I think there's a whole generation of internet [users who] really believe that 'you cannot monetize my data anymore ... the internet should be owned by us,'" Yeung told CNBC.

"That's why there's such a push with crypto because the ownership of ethereum or solana is really the user owning that piece of token, which is only a piece of that internet."

Even though Yeung suggested it would be a "warm winter" for the crypto market, the troubles for the industry have so far been unprecedented.

The nearly $2 trillion plunge in the value of cryptocurrencies was sparked by the sudden collapse of an algorithmic stablecoin called terraUSD which saw its sister token luna become worthless. Several crypto firms, including the now-bankrupt hedge fund Three Arrows Capital, had a large exposure to terraUSD.

Meanwhile, lending firms like Celsius, which took on risky trading bets, faced liquidity issues and also filed for bankruptcy.

These issues have led to contagion across the cryptocurrency industry.

James Butterfill, head of research at CoinShares, is one skeptic of the term "warm winter." The crypto winter has been "brutal," he said, citing the fall of Three Arrows and the drastic drop in bitcoin prices.

"Bitcoin prices have fallen by 74% peak to trough at one point this closely matches the 83% decline seen in 2018 and must be taken in the context that the market is significantly bigger and has a much broader investor base now than it had back in 2018," Butterfill told CNBC in an email on Monday.

The biggest challenge right now for crypto lies in the uncertainty surrounding the Fed's monetary policy and if the central bank will slow the pace of interest rate hikes, said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank.

Markets are anticipating Federal Reserve Chair Jerome Powell's speech on the Fed's next policy move at the Jackson Hole summit on Friday. Any slowdown in the pace of rate hikes could be positive for crypto markets, Hasegawa said.

"I think the Fed will gradually have to face and address some signs of economic slowdown soon, so my mid-term outlook is somewhat optimistic," Hasegawa said.

Meanwhile, Butterfill pointed out that predicting the Fed is challenging as the economic picture remains mixed.

"A move to become less hawkish could be very supportive of Bitcoin prices. As hawkish Fed policy initiated this bear market in December/January, so could a dovish stance prompt it to break out of its $20,000$25,000 trading range," he said.

Ether, the world's second-largest cryptocurrency after bitcoin, is thetokennative to theethereum blockchain. Sol is the native cryptocurrency of solana, a public blockchain that supports decentralized finance apps that aim torecreate traditional financial systems, like banks and exchanges.

Asked if ethereum has stronger underlying fundamentals than bitcoin, Yeung from Race Capital said the two cryptocurrencies are "very different."

"Bitcoin is a digital gold," she pointed out, saying that ethereum and solana are similar to "decentralized cloud services" where applications are built on the blockchain network but run by "many, many people."

Ethereum and solana are blockchains that position themselves as a platform developers can build apps on top of. Bitcoin meanwhile was set up to be a payments service and so is different to Ethereum and Solana.

Ether has so far massively outperformed bitcoin since both digital coins bottomed in June due to a highly-anticipated ethereum network upgrade.

CNBC's Arjun Kharpal contributed to this report.

Read more:
Bitcoin has crashed 68% from its peak but one bull says the latest crypto winter is a 'warm winter' - CNBC

Bitcoins drop isnt much of a surprise. Interest rates have risen in the past few weeks as markets worry that the Federal Reserve would keep lifting rates to combat high inflation. Risk assets like stocks and cryptocurrencies had rallied in the summer precisely because Wall Street had hoped that the Fed would slow down its rate hikes as inflation cooled. But with rates now not far below their multiyear highs, Bitcoin is facing pressure. When risk-free assets like government bonds offer a higher rate of return, it makes buying riskier assets less appealing.

Bitcoin, unlike the stock market, is near a danger zone. At just over $21,000, its hovering just above key support around $19,000, where buyers have previously stepped in to send the price higher. A move below that price could open the door to more losses ahead with buyers absent. Bitcoin is dangerously close to resuming the long-term downtrend, wrote John Kolovos, chief technical strategist at Macro Risk Advisors.

Original post:
Bitcoin Has Stumbled. Thats Not a Good Sign for Stocks. - Barron's

Binance, the worlds biggest cryptocurrency exchange, recently attended a Philippine Senate hearing where industry leaders and regulators discussed policies and guidelines for the country regarding digital assets, per a report from local news outlet Inquirer.

Three government institutions attended the Senate hearing: the Securities and Exchange Commission (SEC), the central bank Bangko Sentral Pilipinas (BSP), and the Cagayan Economic Zone Authority (CEZA). These institutions were also in attendance with the Senate banking committee, as well as leading crypto currency exchange Binance and Fintech Alliance Philippines, a digital asset advocacy group in the region.

We strongly believe that the crypto industry can greatly benefit the Filipino people through addressing the necessity of financial inclusion through digitalization, said Kenneth Stern, Binances general manager for the Philippines, per the report.

Per the discussion, Binance has already partnered with Philippine universities and other professional groups to offer free courses in blockchain technology and cryptocurrencies, such as bitcoin. During the hearing, it was reportedly found that providing access to financial literacy would be foundational to the establishment of a functional framework.

78% of Filipinos remain unbanked, but crypto can help decrease that number as crypto asset holders will soon surpass the number of credit card holders in the country, Stern continued.

Proper consumer protections were also a central point of the discussion as the BSPs deputy governor explained the central bank didnt want to stifle or hinder growth in the ecosystem, but it also wanted to earn consumer confidence.

Thus, while a large focus will remain on financial literacy, it was agreed that a proper regulatory mechanism would be necessary to ensure innovation, growth and security within the digital economy.

The rest is here:
Philippine Universities Team Up With Binance To Offer Bitcoin, Crypto Courses - Bitcoin Magazine

Bitcoin, the metaverse and NFTs are the talk of the town these days, but how much do you think it would help our children if they knew about this?

A recent survey including more than 800 parents and 200 college graduates in the United States was conducted to gain a greater perspective and understanding of the value of a crypto education.

According to a poll conducted by the educational portal Study.com, more than 60 percent of American parents want their children to take bitcoin and other cryptoprograms in high school.

The survey revealed that 64 percent of 884 American parents and 67 percent of 210 American college graduates feel that cryptocurrency should be compulsory in schools.

All interviewees were examined to make sure they possessed at least a fundamental comprehension of cryptocurrencies, the blockchain, andthe metaverse.

The American education system is continuously adapting to new innovations and adjusting to meet the demands of an evolving economy.

As this progresses, it is important to look into which courses students should take to increase their prospects of a higher standard of living after graduation.

Sixty-seven percent of college students who participated in the study reported having crypto assets and contributing an average of $1,086 to their education using digital currency profits.

Based onthe conclusions of an Investopedia survey, students increased interest in cryptocurrencies is consistent with this trend. It was discovered that one out of every five college students used their student loan funds to invest in cryptocurrency rather than for daily allowance and other essentials.

According to the Pew Research Center, approximately 16% of Americans have invested in or traded cryptocurrencies, while over 88% of U.S. residents have heard of crypto.

Meanwhile, some community leaders, such as the mayor of New York City, Eric Adams, are already spearheading initiatives inincorporating cryptocurrencies into the classroom.

The mayor believes that educational institutions should teach children about cryptocurrencies and blockchains since they represent a new approach to thinking and a cutting-edge payment method.

Union Catholic High School began teaching its students about cryptocurrency as early as 2018. The focus of the class was on the history of cryptography and blockchain technology.

Conversely, several of the United States premier institutes have already included blockchain and cryptocurrency into their curricula. They include prestigious universities such as Harvard University, Oxford University, and MIT.

The rest is here:
Bitcoin Classes: Over 60% Of Parents Want Their Kids To Learn Crypto In School | Bitcoinist.com - Bitcoinist

Bitcoin evangelist and Republican Senate hopeful Blake Masters has invested millions into a wide variety of cryptocurrencies. But according to recent financial filings viewed by The Verge, Masters own digital investments have seemingly tanked in value over this past years cryptocurrency crash.

Masters, proteg to billionaire tech investor Peter Thiel, disclosed a dozen different investments into different cryptocurrencies and platforms in a personal finance filing last week. As of August 15th, Masters owned between $600,000 and $1.2 million in Bitcoin alone, a dramatic decrease from the $1.1 to $5.2 million he touted in financial disclosures last year. Masters did not disclose any significant profits from his Bitcoin investment, suggesting a decrease in overall value rather than a potential sell-off.

Amongst Masters current holdings are investments in Bitcoin, Bitcoin Cash, Ethereum, Filecoin, Litecoin, and Tezos. Filecoin and Tezos were the only cryptocurrencies that Masters reported earning interest from this past year, claiming to have made between $1,001 to $2,500 each.

While some cryptocurrencies have started to stabilize and regain value since their June lows, Masters own Bitcoin declines are consistent with the broader crash in cryptocurrency prices over the past year. Bitcoin is still down 60 percent from August 2021, while Masters second-largest holding Ethereum has shed more than half of its market value (Masters Ethereum value range of $250,000-$500,000 did not change year over year).

Masters campaign did not confirm whether his assets had decreased in value but suggested to The Verge on Monday that he used his cryptocurrency investments to loan money to his campaign. Masters only reported between $100,001 and $250,000 in loans as part of his yearly filing last week. A spokesperson for his campaign did not immediately respond to clarifying questions from The Verge.

Masters also disclosed more than $300,000 in book royalties from Zero to One, the Silicon Valley startup guide the Trump-endorsed candidate co-wrote with Thiel in 2014.

Once a candidate formally announces that theyre seeking public office, they are required to file public financial disclosures for each year of their campaign. While the disclosures dont require specific investment totals, candidates must provide an estimated range for the value of significant asset investments, including digital assets like cryptocurrency.

For Masters, who is running to unseat Sen. Mark Kelly (D) for Arizona, cryptocurrency proliferation and federal adoption has become a major part of his campaign platform. Right before the markets began to crash last fall, Masters tweeted that the US government should buy a strategic reserve of Bitcoin, likening it to Fort Nakamoto or the new Fort Knox. Masters has also offered NFTs to people who have contributed the maximum of $5,800 to his campaign and claims that his campaign accepts donations in Bitcoin.

In a May Fox Business interview with Maria Bartiromo, Masters suggested that Bitcoins caving value would only be temporary.

Its not like its only crypto thats crashing, right? Unfortunately, everything is crashing, Masters said in the interview. But its true, cryptos exceptionally volatile. I always tell people to only get involved, only buy Bitcoin if youre ready to buckle up and weather the storm because this is the Wild West.

Read the original:
Blake Masters' Bitcoin investments tanked in 2022 - The Verge

A Latvian national has been handed over to the United States where he is accused of fraud through several companies offering false crypto investment opportunities. Ivars Auzins will appear in a federal court in Brooklyn to face multiple charges of wire and securities fraud.

Ivars Auzins, a citizen of the small Baltic nation of Latvia, was extradited to the United States on Friday. The Latvian has been handed over to the American judiciary on a six-count indictment charging him with wire fraud, securities fraud, and conspiracies to commit wire and securities fraud in connection with the operation of eight businesses that purported to offer, invest in, or mine digital assets.

Auzins will be arraigned on the indictment on Saturday in a federal court in Brooklyn before the Honorable Roanne L. Mann., the U.S. Department of Justice said in a press release. The charges were announced by United States Attorney for the Eastern District of New York Breon Peace and Michael J. Driscoll, assistant director-in-charge of the New York Field Office of the FBI:

Auzins perpetrated a brazen scheme in which he fleeced investors who funneled millions of dollars into fraudulent cryptocurrency. This Office will continue to vigorously investigate and prosecute those who lie and steal from investors, including those like the defendant who operate from abroad.

According to the indictment, the Latvian allegedly ran several companies, the Auzins Entities, which advertised through email campaigns, social media, and websites dedicated to cryptocurrencies. They suggested valuable investment opportunities and solicited investments before suddenly disappearing.

Two of these, Denaro and Bitroad, raised funds through initial coin offerings (ICOs). Impressio Estate, Broi Investments (Bankroi), Changepro, Gemneon Investments, and Lycovest presented themselves as crypto investment platforms providing different investment plans and profit rates. Innovamine offered investments in mining a number of coins, including bitcoin (BTC) and ether (ETH).

Auzins and his co-conspirators allegedly enticed investors to put money into their projects through a series of material misrepresentations and omissions about the offered products and services, the profits that investors would earn by investing in the Auzins Entities, and the individuals who operated them.

Between approximately November 2017 and July 2019, individuals in the United States and other jurisdictions transferred at least $7 million in digital assets to Auzinss companies. Shortly after receiving these investments, these entities disappeared without providing their promised services, the DOJ pointed out.

The Justice Departments Office of International Affairs worked with Latvian law enforcement agencies to secure the arrest and extradition of Ivars Auzins to the United States, and the U.S. Marshals Service carried out the extradition, the announcement details. The New York Regional Office of the U.S. Securities and Exchange Commission assisted the investigation.

Auzinss transfer to the U.S. comes after the recent extraditions of two Russian nationals accused by American authorities of crypto-related crime. Last week, the Netherlands transferred 29-year-old Denis Dubnikov, who is accused of laundering proceeds of ransomware attacks on individuals and organizations in the United States, including hospitals and healthcare providers. Earlier this month, Greece extradited 42-year-old Alexander Vinnik, alleged operator of BTC-e, who allegedly laundered at least $4 billion through the now-defunct digital asset exchange.

Do you expect more extraditions to the U.S. of people suspected of crypto-related crime? Tell us in the comments section below.

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchenss quote: Being a writer is what I am, rather than what I do. Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Nomad_Soul

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Latvian Extradited to US for Wire Fraud Involving Crypto Investments Bitcoin News - Bitcoin News

This is an opinion editorial by Shinobi, a self-taught educator in the Bitcoin space and tech-oriented Bitcoin podcast host.

The Lightning Network as a payment routing network has many similarities with the internet itself. You must be connected to the network, payments are routed from one source node on the network to a destination node just like data packets on the internet and it requires an unbroken connection from the source to destination. It also has one massive difference the requirement for liquidity. On the internet, as long as bandwidth is available (i.e., the pipes are not "clogged"), you can pass an infinite amount of information along a route as long as you have enough time to wait for it to get through. Lightning channels, however, can be depleted, as they require actually moving money from one side of a channel to another in order to route a payment, and eventually they will run out of money on one side and push all of it to the other.

This creates a necessary balancing act between the use of the network in the present to forward payments for individual users and the health of the network in the future regarding its capability of forwarding payments for other users. Each time someone routes a payment through a specific channel, they increase the likelihood that the channel they used will not be able to process payments in the same direction for other users in the future.

In essence, users attempting to adopt strategies en masse to benefit themselves in terms of guaranteeing the delivery of their payment can have negative effects on the overall liquidity distribution of the network and actually lower the likelihood of individual users' payments arriving successfully at the destination. Essentially, whatever strategy is dominantly used by end users to select routes for their payments is going to have systemic effects on the entire network. In the negative sense, i.e., how individual behaviors have degrading effects on the system as a whole this dynamic is known as the price of anarchy.

Rene Pickhardt has been engaging in a line of research to develop heuristics useful for improving the reliability of payment delivery across the Lightning Network. One strategy to achieve the goal that has come out of this research is referred to as Pickhardt payments. Currently the most frequently used strategy across the network is to prioritize route selection based on the lowest fee. This works rather well for small payments, but not so much for larger amounts. Intuitively, the reason should be obvious: such low fee routes are widely used which tends to push liquidity in one direction, leaving less available. The effect this has for other small payments taking the same route is small until approaching depletion, but for larger amounts, the odds of success become lower.

Pickhardt payments work by prioritizing reliability over cheapness, making educated guesses on the probability of a payment succeeding over different potential paths it could take. Just like the dominant, low-fee prioritizing strategy, over time as a node attempts to make payments and sees some fail it will update its assumptions on the probability of payment success and over time refine its accuracy. This should help prevent nodes in swarms always depleting the same channels, because their view of the network in terms of reliability will evolve uniquely over time.

An important part of path selection is considering which direction liquidity is flowing in a channel. Is it balanced both ways? Is it predominantly one direction? In his most recent research looking at the dynamic of the price of anarchy, Pickhardt noted his realization that, based on public gossip data, it may be possible to estimate the rate of drain in channels, how balanced or unbalanced the flow through it is and further improve the reliability of estimations on payment success or failure along certain routes. Estimating this correctly allows you to look at a channel and guess which direction has a high probability of completing a payment and which direction has a low probability.

Another aspect to Pickhardt payments is to optimize for both reliability and low fees. In modeling things to study the price of anarchy dynamics of the Lightning Network, it was discovered that optimizing for both reliability and fees lead to one of the worst externality costs for the network or the highest price of anarchy. This seems to create the greatest rate of channel depletions across the network out of all path selection strategies.

Now these effects don't exist in a vacuum or without counter balances. Routing nodes on the network are also actors that have tools at their disposal and can adopt strategies to optimize the flow control and counterbalance this. Routing nodes can alter fees to disincentivize pushing liquidity to one side of a channel, i.e., if most payments are flowing one direction they can charge higher fees for that and lower fees for going the other way. Nodes can open or close channels, creating new connections to meet higher demand. Nodes can also rebalance channels, pushing liquidity from one channel of theirs out into the network and back into another channel of theirs to alter the liquidity distribution in that channel. Nodes sending payments can also select and utilize different path selection strategies when they observe the current one is leading to frequent payment failures.

I'm sure people reading right now are thinking something along the lines of, "Who cares, the market will sort it out, Lightning is a market-driven system." Lightning is an almost entirely market-driven system, but it's not that simple when analyzing dynamics like the price of anarchy. Users of the network are not going to be analyzing routing algorithms manually, picking and choosing what to use with each payment; They are going to be using tools and software that automates all of this and hides it in the background. This makes this kind of research important to the overall health of the network. A way needs to be found to enable end users to engage with the network selfishly, prioritizing their own interests, without degrading the performance of the network as a whole.

Modeling how these two dynamics interact, the strategies for sending nodes and mitigation strategies for routing nodes is incredibly important for developing strategies for both classes of users to balance and optimize the overall health of the network and the reliability of payments for individual users. Routing data between different devices is a long-solved problem in computer science, which the Lightning Network builds heavily on but the dynamic of liquidity constraints adds a new facet to the entire field of research around reliably routing information.

The Lightning Network has been a huge success so far in improving the speed and scalability of payments using Bitcoin, but to continue that success at larger scales and a larger load from more users, the interaction of these two different dynamics needs to be thoroughly understood and accounted for. In order for users of the network to adopt successful strategies, those strategies must first be developed, understood and verified.

This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Link:
Can Bitcoins Lightning Network Overcome The Price Of Anarchy? - Bitcoin Magazine