Lightning Network LSP｜LSP specifications and interoperability, the future of Lightning Network self-hosting

The Original Title: "Lightning's Future—A New Era of Interoperability with LSP Specs"

The Original Author: Pav Nikolov

The Original Translation: Luccy, BlockBeats

Editor's Note:

Similar to ISPs that provide internet access, Lightning Service Providers (LSPs) provide liquidity and network services to users and businesses on the Lightning Network by establishing good connections and opening channels in the network, while charging service fees and maintaining self-custody.

In order to balance the security and usability issues in the use of the Lightning Network, Lightning Service Providers (LSPs) have emerged, which can simplify the complexity of the Lightning Network and help users enter the Lightning Network. Unlike custodial solutions, using LSPs can retain full ownership of personal user assets without giving up control of the keys. Of course, LSPs also have their own problems and limitations.

This article is sourced from the blog of cryptocurrency researcher Pav Nikolov and will be summarized and compiled into a collection of articles related to Lightning Network LSPs. BlockBeats will continue to update this collection. The following is the original translation:

There are many trade-offs in the Lightning Network, which makes it difficult for us to provide a self-custodial user experience on mobile devices. Many new users choose hosted solutions when they first experience the Lightning Network because they are easier to use and have a simpler user experience. They do not know that they are handing over their private keys to a third party, nor do they know how big of a sacrifice this is. If you know, it is easy to find a lot of precedents to prove that this is a bad idea, such as the lessons learned from Mt. Gox hack.

Therefore, it is very important to develop a user-friendly solution that prioritizes user control and privacy while ensuring that non-technical users can also easily use it.

LSP and Lightning Network Extension

One way that builders have discovered to simplify the complexity of the Lightning Network is to use Lightning Service Providers (LSPs). Simply put, LSPs are similar to ISPs (Internet Service Providers) that help you connect to the internet, except LSPs help users enter the Lightning Network without needing to know what's inside the "engine room". Another subtle difference is that, unlike ISPs, you can connect to any number of LSPs as needed.

One thing that people often overlook is that LSP not only enhances the scalability and reliability of the Lightning Network, but it also achieves this without requiring users to relinquish control of their funds.

Contrary to custodial solutions, using LSP allows individual users to retain full ownership of their assets without giving up control of their keys.

Currently, the companies Breez, Phoenix, and Bitkit, which develop LSP and natively integrate them into their self-custody wallets, form a thriving ecosystem.

However, LSP also needs to make progress to overcome some of its own issues.

What problem needs to be solved?

Currently, the vast majority of self-custody lightning wallets integrate a single LSP. If users are dissatisfied with the user experience or reliability of this app, they have to clean up the wallet, transfer funds, install a new wallet, transfer funds, open a new channel, and create a new backup. Even for users who are proficient in Bitcoin, they will not find this process very interesting.

Now, even if you are willing to use a certain app as your main wallet, you cannot use this app to connect to another LSP.

There are more than just these issues.

用户体验

translates to

User Experience

LSP plays an important role in helping users quickly get started and initiate self-custody Bitcoin payments, but all services have their own service conditions, and LSP is no exception.

Specific LSPs may impose restrictions on the amount of liquidity they provide, be unwilling to establish zero-confirmation channel connections, or even disallow users from setting initial spending balances. While the terms of LSPs vary, users have no choice. Simply put - you can only use the one that your mobile wallet integrates with. At least at the time of writing this article.

Impact on User Developer Issues

In addition, wallet developers also bear the task of managing LSP, which is a daunting task for technical personnel and often goes beyond their core expertise.

In addition, deploying (locking) funds and opening channels on the network will also bring capital requirements and opportunity costs.

From the short term to the medium term, the above mechanism will limit users' choices of available wallets.

Looking for Solutions - Like-mindedness

Now, we have listed all the challenges - but what can we do? Synonym collaborates with other industry leaders to create a completely voluntary and open LSP specification that anyone in the community can contribute to.

More than a year ago, the LSP Group was born. The brightest minds in the Lightning Network ecosystem came together to discuss a new LSP specification, with some of the participants including:

Synonym、Breez、C=、Bolt Observer、Blockstream、Boltz、Spiral、Mutiny、Lightning Labs、LNetwork+、Amboss。

The LSP Group currently has approximately 130 members and holds conference calls with multiple industry participants every two weeks.

Here are some exciting achievements that the LSP Spec Group has obtained so far.

Directly purchasing standardized channels from LSP

This essentially means that the purchasing channel operation can be standardized, which is why it is important. Wallet developers can therefore more easily implement a standard rather than multiple standards. Ultimately, users will have more choices to connect to multiple LSPs without being locked into the dilemma of "one wallet can only use one LSP".

Instant Payment Limit

One frustrating aspect of the Lightning Network is that in order to receive payments on the Lightning Network, you first need to obtain a "receiving capacity", also known as "incoming liquidity". Liquidity has a direct impact on user experience. Without outgoing liquidity, you cannot send Bitcoin via the Lightning Network. Similarly, a lack of incoming liquidity means that you cannot receive Bitcoin payments via the Lightning Network.

By abstracting the need for on-chain liquidity, this new feature allows users to settle balances in the background, deduct fees required to open a lightning channel, and immediately receive payment. All of this happens in the background, resulting in a smoother user experience.

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