Is there an advantage to Lightning/Stellar as compared to Lightning/Bitcoin? I understand that Stellar has far better speed than Bitcoin, but with Lightning being used as the transaction layer, does that speed difference matter?
Every single project I've seen that is looking into Lightning has simply offered lofty promises and roadmaps but without any compelling advantage of Lightning on their coin as opposed to Lightning on Bitcoin. If anything, they have a big hurdle to overcome - Bitcoin's first mover advantage with regards to LN development. PLEASE correct me if I am wrong, but as far as I have seen 99% of off-chain development progress has been Bitcoin/Litecoin, with other coins simply following the progress made and hoping to change a few parameters to make it compatible with their coin.
And the speed difference you mention is an important point - so many of these coins have acted as artificial capacity surrogates during Bitcoin's scaling woes. But with LN, I don't see their use at all...
They allow faster and cheaper on-chain transactions.
Some prefer to avoid LN if possible, especially as its topology may turn out to be not as p2p as people prefer, and LN nodes may be operated by corporations who may or may not have KYC regulations that people would like to avoid. Besides this, there are general PoS vs PoW differences--some consider PoW an undesirable waste of energy while others consider it a way to secure the network.
I feel the same way about most new coins trying things out. Bitcoin just has to sit and wait for it to show promise (and stability) before integrating it and invalidating that coin's only differentiation.
Even things like smart contracts can be integrated into Bitcoin (I believe the Bitcoin Cash camp is working on this)
The Bitcoin Core developers have been openly been hostile toward the smart contract use case. They even went so far as to change the size limits on Bitcoin's OP_RETURN op code in order to screw over Counterparty one of the original smart contract implementations. Vitalik Buterin, the creator of Ethereum, is on record saying that the whole reason Ethereum exists as a separate thing instead of a system on top of Bitcoin is because of the contempt the Bitcoin Core developers showed toward the smart contract use case.
That's true, but I merely intended to say that there are plans to introduce smart contracts for Bitcoin, and there is considerable support for this. Naturally, this is intended as a second-layer solution.
Stellar is more bank-friendly: it can handle fiat currencies and fiat exchanges, and it supports regulatory compliance (KYC and AML).
Also — Lightning reduces fees and transaction times, but these costs still matter. The time and cost to open and later close a payment channel is a multiple of the latency and transaction cost of the underlying chain. Not very transaction will need a new payment channel, but other things being equal (in particular: connectivity of the Lightning graphs, average transactions per payment channel), the network with lower non-Lightning costs will have proportionally lower Lightning costs too. The cost matters when there’s lots of transactions; the latency makes a difference to both mean and worst-case Lightning transaction and settlement time.
Lightning for X means a way to transact in X without waiting for block intervals, for example for micropayments. Eventually it will be used to do rapid atomic swaps between tokens, and for this reason it will likely be available for all major tokens.
Bitcoin is the slow part of on-chain atomic swaps, so that could be a reason to implement lightning for tokens that already have fast transactions.
atomic swaps have awesome potential, the first to provide a stable intercurrency decentralized exchange with escrow of funds and wallets held by the asset owners with private keys will be a big winner :)
I haven't looked into the Lightning/Stellar combo yet, but one thing that Lightning/Litecoin and Lightning/Bitcoin (and others) have is that you can abstract away which coin you are paying with, and which coin the vendor accepts.
If all the LN implementations match, then I could, for example, pay with Bitcoin on LN to a node that will convert it to Litecoin at a given price, then will send that payment to the vendor's node who will accept Litecoin as payment.
That gives a massive incentive for altcoins to support and match the Bitcoin lightning-network APIs exactly, as then it becomes much easier for them to gain market share based on their other qualities (like stability, security, decentralization, longevity, etc...)
You only need to open a few channels to reliably connect to the network - the network allows you to transact with those you don't have a direct channel with. And in actual usage you won't ever need to close them. Lightning solves transaction costs.
Well that depends. If you run out of money, then you have to transfer more coins onto the network.
If you don't want to make frequent 'top up' transactions to what is effectively a hot wallet, then you'd have to lock away many thousands of dollars.
Transaction fees on chain still matter quite a lot if you are unwilling to lock away a whole bunch of money up front.
Also the more money that is locked away on the LN, the more vulnerable to attack it is.
This is because one can attack the network by DDoSing the main chain, such that blocks are full for the time lock period. IE, if someone cheats and publishes an old LN transaction history, you have to publish your anti cheat transaction and if blocks are full for the couple weeks, then you can't defend yourself.
This style of attack only works if there is a bunch of money in the network though.
It is also counteracted if the main chain has high capacity as it becomes that much more expensive to attack the main chain.
Stellar is already fast enough, but I think it will improve scalability. Stellar aims to be "the internet of money" and for this the current throughput of 1000 tx/s is just not enough.
Right, but that doesn't seem to answer my question. I know that Stellar isn't quite fast enough to become the word's money transfer solution on its own. It appears that the Lightning Network (or some other solution) needs to go into the mix for that. But once we're using Lightning Network, why do we need Stellar? Does Stellar have any advantage over Bitcoin as the underlying foundation? Or is the idea here just that Stellar doesn't want to be left out of the Lightning Network, rather than it solves some problem that LN would otherwise have?
EDIT: Proposing an answer to my own question, perhaps LN transaction fees could be significantly lower if using Stellar rather than Bitcoin as the supporting blockchain? If so, does anyone have any estimates regarding the difference?
EDIT 2: It does seem that there would be an advantage to Stellar at the time a channel is closed, since the fee for the underlying blockchain transaction should be significantly less.
Speed? No, not really in comparison to any other LN implementation.
But Stellar will be supporting state channels in addition to payment channels, (presumably) allowing for even faster exchange operations (buy/sell market and limit orders) and path payments across multiple currencies, neither of which LN on Bitcoin can do (at least for now).
Also you can send inordinately small amounts, practically, with stellar/ln. The smallest unit of measure in Bitcoin, one satoshi, is already 1/110th of penny! It would cost you more than that to send it to someone and you would have trouble doing a million of those per second. This exact concept was used as a ddos of sorts to slow down legitimate Bitcoin transactions.
