Bitcoin's Lightning Network To Boost Existing Blockchain
The Lightning Network sets high expectations for the future of the Bitcoin Network
Image source: pixabay - skeeze
Bitcoin's Lightning Network could help resolve scalability issues of the network. Here, we are looking at 4 main benefits:
Instant Payments
Scalability
Low Cost
Cross Blockchains
The Lightning Network is dependent on Bitcoin's blockchain, tapping into blockchain transactions and using its native smart-contract scripting language to deliver larger volumes quickly. How Lightning Network works is explained in greater detail on: https://lightning.network
While altcoin supporters are likely to swoop in, telling us that there are many altcoins out there with extremely fast transaction speeds, we ought to look at improving Bitcoin. The cryptocurrency market capitalization is controlled mainly by Bitcoin at approximately 40 percent. To lend aid to Bitcoin and the focusing on the success of Bitcoin is to ensure that cryptocurrency gain mainstream attention.
Image source: pixabay - sasint
So as Bitcoin develops its Lightning Network, "two parties deposit the funds at one bitcoin address, a so-called "channel," in which they can exchange funds a limitless number of times". Source: Forbes - Billy Bambrough. Security is maintained and regular payments do not have to be added directly to the blockchain.
"If overall transaction levels remain constant but shift to the Lightning Network, then this should result in reduced mining fees, said Garrick Hileman, head of research at Blockchain.com and co-founder of Mosaic.io, a platform for market intelligence on cryptocurrencies.
Source: Forbes - Billy Bambrough
While the second-layer solution for Bitcoin may be coming its way, it could still be limited to micropayments. Lightning Networks require funded nodes to support it and every nodes needs to be online when the payment is made. Source: CCN - Francisco Memoria. Reliability of the lightning network requires more thorough testing for it to be fully implemented and we are gradually on its way there.
Image source: pixabay - asmuSe
In addition, good news to hear from Coindesk - Alyssa Hertig that PoWx, a non-profit foundation, is putting together a wrapper for Bitcoin's PoW by adopting "optical" Proof-of-Work. A new technology using the energy-efficient laser technology could render the existing PoW mining on ASICs obsolete.
According to the PoWx team, this new algorithm, if implemented, would usher in two huge improvements to bitcoin. One, the barrier to entry for startups producing the chips will be lower, thus increasing decentralization of the network. Two, it reduces power consumption (estimates suggest bitcoin now makes up 0.15 percent of the world's electricity costs).
Source: Coindesk - Alyssa Hertig
So, @tysler, when transactions occur through payment channels on the lightning network they are off-chain correct? For instance if a payment channel was opened between a contractor and the person funding the project, those small transactions such as hardware store trips and other costs would be conducted through this channel off the blockchain? If i understand this correctly then the first and last transactions of the channel are the only ones recorded?
Hi @noahcramos, I'm not studying blockchain tech like you do, but will try my best to address your questions. Do correct me if I am wrong!
Yes, it is based on an additional layer of network on top of the BItcoin blockchain.
Yes, a payment channel is opened between two wallets, that are already registered on the blockchain. As many transactions can occur between these two wallets through the channel, as long as the balance is kept in check. When the channel is completed and closed, the final balance is recorded.
Yes, secured channels between the people you are connected with, is sufficient to perform micro payments. Hence a path of shortest resistance is used. When used together with the main blockchain, it verifies the validity of such channels.
Awesome, thank you for the detailed response and further explanation! @tysler
I'm waiting for some time before I use the LN. Once a wallet makes it simple I will consider it.
yes @feelsomoon, I wonder how LN would actually work in reality :)