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Thanks for the explanation.
Doesn't that just mean that if Bitcoin becomes radically more expensive, such that people are using these new decimal places, a bunch of activity will be restricted to layer-2? On-chain settlements would only be approximate, in a sense.
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Yeah, there would be no way to express that precision on-chain, nor would it be worth paying for
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Spending an HTLC output incurs over 400 weight units of transaction data. With the feerates lately being usually in the double digit [s/vB], it would cost you at least 1,000 sats to enforce an HTLC on-chain. So very small payments are not actually added to commitment transactions and this generally applies to any layer-2 technology that is enforced by users’ ability to unilaterally exit. Bitcoin transaction fees are paid in bitcoin and scale with the weight of a transaction, so the issue is independent of the exchange rate.