There’s a new wave of Lightning FUD hitting the wires, but that’s noise. What no one else is talking about is the signal.

Reality is that Lightning faces a massive incentive problem, one it inherits from Bitcoin itself.

The great wave of shitcoins in the early years highlighted this problem way back then, but it’s manifesting itself in a new, potentially even more dangerous way today.

Since Bitcoin, and its only real L2 in Lightning, are emergent, truly decentralized, disintermediated and “just work” as money, the profit motive for companies looking to benefit from a growing industry skews towards “inventing” things beyond them; there must always be something “new” to re-brand non-solutions or introduce middlemen.

Enter the newest attack by fake L2s, or shitcoins 2.0 as they should be more appropriately framed. Shitcoining 1.0 has lost its novelty, as over time people realize there is one true coin. Scammers have thus adapted, and are now affinity scamming as Bitcoin projects.

Ark, Spark, Citrea, Stacks, and countless others now... with their astroturf for Covenants that would lend them some perceived legitimacy... solve nothing.

These are all means not to solve problems or enhance UX, but to smuggle trust and centralization for profit.

Lightning wallets can very easily introduce trust and centralization with the same exact trade-offs; fake L2s are no different than zero-conf channels, but this isn’t sexy and won’t raise a bunch of money or generate hype. Actually enhancing UX is tedious, hard work, to which I can attest, and inherently requires scarce creativity, otherwise the challenges would be solved already.

This is a perfect storm for the scammer class. Unsophisticated users that lack technical discernment, combined with hipsters always ready to jump on the current thing bandwagon, magnify the scammer astroturf. This reinforces investment theses, then more investment yields more scams, which amp up hipsters and the unsophisticated; it’s a downward spiral.

Unlike Shitcoins 1.0, Shitcoins 2.0 presents a Bitcoin contagion.

Never before have so many disparate scams sought to change Bitcoin itself to pervert the incentives further.

Shitcoins 1.0 sold you a new coin... Shitcoins 2.0 want to exploit YOUR coin.

Shitcoins 1.0 sold your friends and family a new investment thesis; Shitcoins 2.0 stand on the back of your hard-fought orange-pilling.

Covenants are the force multiplier of this attack.

These apps are in chorus over how it enhances the security of their centralized apps, and given their affinity scam nature, the security of Bitcoin. In reality, it has no monetary purpose, only to enable delegation to these centralized middlemen.

If you control your Bitcoin today, you control your Bitcoin, period. Covenants offer you nothing.

Covenants scammers want you to believe, however, that you can control your Bitcoin while someone else, via their fake L2 centralized application, controls your Bitcoin.

New OP_ Codes like CTV, CAT, DRIVECHAIN, and others represent a new era where changes to Bitcoin aren’t argued on the merits of Bitcoin as money, but its use as an Ethereum-like stack for centralized applications.

The “Scaling” Smokescreen

You’ll hear the emotional blackmail from scammers: “But don’t you want to scale self-custody to 8 billion people? Don’t you care about anyone else but yourself?”

This is a deliberate misdirection. Reality is that there are two factors in scaling:

1. Transaction Throughput: Lightning already scales transactions infinitely. This is a solved problem.
2. Ownership (Distribution): This is the real bottleneck. There’s a minimum amount of Bitcoin needed to not be dust. Even at sub-sat fees today, there is not enough Bitcoin for everyone to trustlessly transact (i.e., have a unilateral exit). We’re talking a few hundred million people at most, likely less as institutions continue to accumulate.

Lightning already has batch opens that reduce costs 80%, but no one uses them because cost isn’t the bottleneck—ownership is. Fake L2s literally solve nothing. They are scammers trying to sell you a perpetual motion machine.

Ark as a Roach Motel

The scammer FUD continues: “What about receiving while offline? What about low-balance receiving when you don’t have a channel?”

Ark solves neither of those things. Trust and centralization do.

Let’s compare:

• Lightning: To receive a low amount with no channel, you must use a trusted service. Someone (an LSP) receives the sats on your behalf, and you have to trust them.
• Ark: You want to receive a low amount? You haven’t received anything. The Ark coordinator (a centralized entity) received it with their liquidity and you must similarly trust that they credit you.

It is the exact same trust model. Ark is just re-branding it.

Does it have a unilateral exit? Only at the same point, and with similar on-chain footprint, as opening a real Lightning channel. The chain costs are the same in the end; Ark just defers the cost. The entire premise of Ark scaling is the insinuation that people will defer these costs forever and do trusted receives forever. The entire premise is that the Ark is a roach motel.

Open Networks vs. Centralized Applications

Much of Bitcoin’s value, and all of Lightning’s value, is in it being an open network with no central point of failure or trust needed to enter.

Ark is a closed network. Ark users in the same silo can have similar trust assumptions, but an Ark user cannot pay another Ark user in a different Ark without using the main chain or Lightning. The costs are then incurred on this exit, with trust added to execute the swap.

This demonstrates further that they are just centralized applications, which is why they’re now pivoting to “DeFi” nonsense as their latest narrative. DeFi is a scam word unto itself because there’s no actual decentralization. Entry into their closed network is inherently gated by a trusted swap, so the use-case here is user-to-user payments on something like a shitcoin exchange with its own subnetwork of buyers and sellers.

If you pay the on-chain fee to enter to get Lightning-like trust guarantees, you could have just opened a real Lightning channel for the same cost and be part of the open network where future payments are actually trustless.

What About BitVM?

BitVM is just more of the same: interactive, centralized dog shit. It doesn’t enable anything without covenants; it uses “bridges” to emulate them. Scammers are funding the astroturf for covenants for a reason: to give shitcoinery like this perceived legitimacy.

The argument is that you can “challenge” any deviation on-chain. But if you’re running a service just to keep the centralized entity honest, you may as well have just run the service yourself. All this crap only serves to delegate control to external parties.

The Lightning use-case for it is horse hockey. As above with Ark, does nothing real Lightning can’t. Unilateral exit is supply-bound, not throughput-bound. If you can afford the exit, you can afford a real channel. It’s the roach motel assumption all over again.

The Fallacy of Vaults

But aren’t VAULTs a monetary use of covenants?

No. Just as covenants are a push for centralized remote control, vaults are an attempt to CLAW BACK that control. This leaves 2 mutually exclusive scenarios:

1. Bitcoin loses its utility as money, as merchants can no longer simply rely on confirmations to conclude a payment is settled (fearing a clawback).
2. A merchant can ensure funds are not encumbered through certain output types... but if a merchant can, so can an attacker, rendering the vault pointless from the start.

This is the binary outcome. As soon as someone argues against the possibility of it interfering with merchants (scenario 1), they automatically undermine the argument against attacks (scenario 2).

What Do?

Incentives are a bitch; we couldn’t stop shitcoins... but we did grind them down over time.

The question is whether we can grind down these fake L2s and covenants scammers; fortunately, Bitcoin being hard to change buys us time.

It’s imperative that if you value Bitcoin as hard money and wish to defend it as such, you present the same show of force we showed against shitcoins.

Let every investor and user know, in every comment on every blog or Twitter post, that these applications are not Bitcoin, that Covenants are an attack by the Bithereum Industrial Complex, and that whoever advocates them is either a scammer, a paid shill, or a hipster moron.

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This post is a 2nd revision of a comment to address arguments left here: #1272496