Every bitcoin lover and enthusiast wants the world to know the full potential of bitcoin and how it can change the financial ecosystem of the world. But, one of the major problems associated with bitcoin is the problem of scalability. You can get additional details about bitcoin scalability by checking blogs and resources for regulations-for-bitcoin-wallet of some platforms.
The problem of scalability makes it possible for bitcoin to process only seven transactions per second. Although this was enough when the system was first set up in 2009, now the system is getting congested with each passing day.
Thus, the bitcoin transactions are now taking more time, and thus the transaction fees are increased. If bitcoin wants to improve and if it wants to become the best cryptocurrency, it will have to get rid of this issue of scalability.
Over the years, bitcoin enthusiasts came up with different types of technology, but consensus could not be achieved. Thus, a system with several bitcoin-like networks came up. And this system is called the Bitcoin lightning network.
What is the bitcoin lightning network?
The bitcoin lightning network basically adds another layer to bitcoin’s blockchain technology. This means the system allows the users to create payment channels between the parties on that extra layer created. These layers can be created for as long as it’s needed for a smooth bitcoin transaction. The best part about this system is that the transactions will be extremely quick, and the processing fee will be pretty less.
How does the lightning network work?
The bitcoin lightning network will offer the solution to the scalability problem of bitcoin transactions. The lightning network consists of a separate network of software and nodes. But, the network will remain in constant communication with the blockchain technology through a mini ledger created for the purpose. The mini ledger will be called the channel. The channel will function as the DM or the Direct Messaging protocol provided on Instagram.
The basic purpose of creating the channels is to avoid the issues related to blockchain confirmation. You can also understand the working of the lightning network through a real-life example.
Each of us has thousands of people in our contact list on our phone. But, we have a few people who are on the list of favorites. This is the case with the lightning network.
Thus, the use of lightning networks will ultimately try to solve the scalability and time taking the process of the bitcoin transaction.
The lightning network system will work on top of the blockchain system, but it won’t have any security behind it. Thus, it is said that it will be mostly used for small scale and mini bitcoin transactions. The larger transaction will still follow the original mode of transaction.
Who discovered the lightning network?
The lightning network system was developed by Joseph Poon and Thaddeus Dryja in the year 2015. Three major teams are working at full swing for the current development of the lightning network. These three teams include Blockstream, Lightning Labs, and ACINQ.
Pros and cons of Lightning network
Just like any other technology, the lightning network also comes up with different pros and cons.
- Best transaction speed
- No waiting time for the transaction to get completed and for users to get confirmation.
- Instant transaction even if the network is busy
- The system will easily compete with traditional transaction channels like Visa, MasterCard, and PayPal.
- Users will have to pay very less transaction fee
- The technology will enable the use of bitcoins even in shops and local stores
- It will solve the problem related to the scalability of Bitcoins
- The micropayment made through the lightning network will be almost impossible to get traced.
- The system is not fully operational yet
- Can’t determine at present about the benefits of the system
- The web channel design of the lightning network will make it confusing for beginner users.
- The channels are capped at this moment
- Not best for big transaction
Although the pros of the lightning network exceed the cons, only time will decide how good the system is. With the growing popularity of Bitcoins, everyone is coming up with new inventions and innovations that can make transactions easy and straightforward. The innovation of the Lightning network is definitely a step in a good direction.