Bitcoin : LN : Bitcoin :: Pre-1970 USD : Gold
If you don’t understand the title, it reads,
“The lightning network is to bitcoin, as USD (pre 1970) was to gold.
Basically the point of the gold standard was to keep the stability/predictability benefits of gold, while being more divisible, scaleable, and easier to transact with. The USA originally used gold and silver coins as money. When they introduced paper bills, they actually represented gold:
“Therefore, in the Coinage Act of 1834, the 15:1 ratio of silver to gold was changed to a 16:1 ratio by reducing the weight of the nation’s gold coinage. This created a new U.S. dollar that was backed by 1.50 g (23.22 grains) of gold.”
You can see that a US dollar was just a placeholder for actual gold. You can also see that ratio was not necessarily guaranteed in this case, as the conversion from USD -> gold was a centralized process.
This is essentially what the Lightning Network is. You can trade actual BTC for LN-tokens. You can then transact in LN-tokens quickly and easily. There is no real need to convert LN-tokens back into BTC in many cases, as everyone understand they are essentially the same thing as actual BTC. Much like people transacted in USD knowing it was convertible to gold, people will presumably transact in LN-tokens.
So LN is, in a way, bitcoin’s more transparent take on the USD gold standard.
(Just to be clear, this has nothing to do with the fiat USD of today, which many people here strongly oppose).
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EDIT: Yes, I realize there are no “LN-tokens”. That is a simplification of the reality. Effectively that is what’s happening though. The transactions on LN represent actual movement of BTC on the blockchain, but they haven’t occurred yet. Much like receiving $1 in 1830 represented aquiring 1.50g of gold, but you didn’t have any gold yet. You had a token that represented gold.
Bitcoin
Bitcoin is a distributed, worldwide, decentralized digital money. Bitcoins are issued and managed without any central authority.
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