I think the most important aspect is that Lightning Nodes are just sending bitcoin transactions, the whole system is trustless, the node relying your transaction to destination can't steal your money any more then bitcoin full node relying your transaction to miners can.
Thanks. That was very unsatisfying, though. He's right that there are usually thresholds where money-transmitter laws kick in, but having to track that and refrain once you hit the limit would be onerous and limiting.
If FinCEN rules that operating a lightning node constitutes acting as a money transmitter, it would be unenforceable. It may still discourage operating an intermediate node in the US and shift the majority of nodes to other countries.
Or by ruling that it is illegal to buy, sell or own bitcoin.
While bitcoin might continue, most citizens will stop bothering at that point because buying or selling bitcoin shows up in tax audits.
The government can also make it illegal to operate a bitcoin node or transmit bitcoin transactions, including for ISPs, which would get the protocol quickly blocked.
Additionally they could rule Bitcoin to be an illegal form of monetary exchange which would mean that anything you buy via bitcoin would get you in hot water in addition to the tax problems if you can't prove you used a legal monetary method.
Of course, some people might use Tor and somehow manage to get money extracted from the Tax system so they can buy bitcoin without their local tax office knowing... but how many of the Mr. Normal population are able and willing to do that for bitcoin?
I think you severely underestimate the power of the government.
You will have a drug war on your hands, only way harder to enforce thanks to encryption.
It's a losing game, and I think you forget that there are way too many rich people in positions of power who like crypto for it to be successfully killed. The ruling classes actually like it more than the lower classes do.
The drug war hasn't really helped in putting illegal drugs into mainstream use.
Mainstream users will not use bitcoin if it becomes illegal. End of story. Maybe some people continue to use it but it'll probably be far below any drug usage levels.
>It's a losing game, and I think you forget that there are way too many rich people in positions of power who like crypto for it to be successfully killed. The ruling classes actually like it more than the lower classes do.
That's barely relevant because the "rich ruling classes" could still do it. I'm evaluating this as "what if they do" not "would they do"
Still useless from the PoV of this argument until you get to the point where you can buy stuff you need directly in crypto without conversion to fiat. We're a long way from that now, and the closest practical workaround (bitcoin to gift cards to stuff) goes away if the government gets hostile.
The government doesn't have to make it impossible for cypherpunks and superhackers to use bitcoin, it just has to scare normal people. That's easily done with a few laws and some gratuitous enforcement, e.g., throw a few thousand people in jail for tax evasion, watch how long it takes for these casual hodlers to liquidate. That's 90% of the battle won, and 90% will probably be enough.
There may be a kernal of truth to this, but the fact is, to do this with overwhelming force there needs to a strong social impetus to do this.
With drugs you had families ruined by drug addiction desperate for a solution.
With bitcoin you have... what? Unwavering respect for the right of governments to restrict something most people can identify has at least some utility?
The social consensus for a harsh crackdown is not there, and like the internet on issues with copyright, governments will continue to muddle along as this all evolves way quicker than they can deal with it (kind of like Uber).
You have a government losing its sovereignty over its own money supply, for all practical purposes. After being invaded, or losing territory due to an invasion, that's about as serious a threat as any on offer.
Yeah, sorry, I replied to the parent while thinking forward. I agree that in order for cryptos to succeed, merchants have to use them first. It is definitely not simple and we are far from it because it involves rendering the current system obsolete and a mental shift in how we think about money and governance. Eventually I expect governments to be affected, too.
I've seen nothing to suggest that a LN operator would be considered a money transmitter. Whats your best reason for thinking so, and why does your definition of money transmission not include miners?
Miners only register a transfer of value and validate it against their perspective of the current ledger. Transfer routed through a lightning channel involves explicit exchange of funds between intermediaries.
https://coincenter.org/files/2018-01/federalalternativev1-1.... talks about the general picture (I only skimmed it). It wants reform to "include a safe harbor for novel businesses that do not create the sort of
risks to consumers that money transmission licensing is meant to address (but which may be
treated as money transmitters under a loose interpretation of some state statutes)."
A LN node is no more a "money transmitter" than any internet router that a bank transaction flows through is a "money transmitter".
The node or router can't "steal" or modify the amount or destination in any way, and there is no counterparty risk with either of them, so they both aren't "money transmitters".
But a regular bitcoin node isn't transferring money. It's simply tracking the state of the network. A lightning node is creating transactions and financial agreements with other nodes in the network.
