Everything about Lightning Network

One of the biggest problem that Bitcoin and the blockchain network is facing right now is its ability to respond to the demand of transactions that is being processed today. When Satoshi Nakamoto first published the technology some ten years ago, the most valid question that was asked to him (or her, who knows) was how could the technology be scaled when demand shoots up.

In fact, the first public comment on Satoshi’s white paper was made by James A. Donald contained the following line: “the way I understand your proposal, it does not seem to scale to the required size”. Ten years later, the question still remains relevant as scalability is still an issue in the Blockchain network.

Bitcoin’s scalability dilemma

Before we dive deeper into the Lightning Network, let us first discuss Bitcoins scalability dilemma. The way that Bitcoin was designed was for each block to handle only 1MB worth of data. This size of the blocks was not a problem back then, however, as the popularity of Bitcoin grew every single day, this size becomes a problem.

With the current block size, the Bitcoin network can only process an average of seven (7) transactions per second. The more and more people join the network, the more transactions are left in queue and this has cost an inconvenience. The first inconvenience that this has caused is delay. Since only seven transaction are processed every second and the demand definitely exceeding that, the duration by which a transaction is process went from almost instantaneously to more than 3 hours.

In order to address this problem, miners  have started to charge higher transaction fees to those who want their transaction to be prioritized. This means that those who cannot afford to pay more fees have to wait longer. This has caused the service fees to balloon over time.

With the current goal of Bitcoin to become the primary currency used by people over the internet, there is definitely a need to address this problem. If not, Bitcoin will find it hard to compete with other online payment methods like Visa that can process more than 250,000 transactions per second.

The scalability debate has floated different suggestions and methods that aims to address this specific problem in the Bitcoin network. That includes changing the block size among others. However, one of the most promising suggestions that engineers and developers have been testing right now is the Lightning Network.

What is the Lightning Network

Lightning Network is another layer of technology that adds on top of the blockchain to allow users to make unlimited micro transactions. After these micro transactions are done, the final balance will be the only thing to be reflected in the main blockchain network. In a nutshell, the idea of the Lightning Network is this: we don’t have to record every single transaction on the blockchain.

CoinTelegraph has this to say about Lightning Network: “Lightning Network adds another layer to Bitcoin’s blockchain and enables users to create payment channels between any two parties on that extra layer. These channels can exist for as long as required, and because they’re set up between two people, transactions will be almost instant and the fees will be extremely low or even non-existent.”

As of the moment, Lightning Network is still in the development and testing stages. However, there are already promising results that points towards it as being the most reasonable solution to the Bitcoin scalability dilemma.

Why use Lightning Network? 

Faster Transactions

Since all the transactions between two individuals will no longer be recorded in the Blockchain, the Lightning Network will allow users to make transactions faster,. If the network becomes live, you won’t have to wait for several confirmations of every transaction you’re trying to make. The transactions will be almost instantaneous no matter how busy the network is.

Lower Service Fees

As the transactions will essentially happen within the Lightning Network and not necessarily directly in the Blockchain, the service charge will become minimal. Some even suggests that fees will become obsolete. This could pave way for Bitcoin to become the biggest payment system for e-commerce and stores worldwide.

Scalability

Experts believe that the Lightning Network is going to be the solution for Bitcoins scalability dilemma. Cointelegraph even forecasted that it could be able to take the transactions per second figure of Bitcoin and other cryptocurrencies to unprecedented heights of at least 1 million transactions per second.

Cross-Chain Atomic Swap

The Lightning Network has the potential to allow trade between different kinds of cryptocurrencies. As of the moment, you have to use an ultra-centralized crypto exchange platforms to do that. Because it passes through another third party, doing so becomes extremely costly. As long as the two blockchains share the same cryptographic hash function (and most major one do), the users will be able to send money from one chain to another without having to trust a third-party intermediary, such as an exchange.

Final Thoughts

Lightning Network carries a lot of potential especially in scaling Bitcoin and the blockchain to become one of the most popular payment channels to be used in the world. However, as of the moment, the Lightning Network is still in the development and testing phase. Whether or not this could solve the ten-year problem of the Bitcoin community, only time can tell. What is for certain is that there are brilliant minds out there who are continuously working hard to find a better solution to Bitcoins scalability dilemma.

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