What is a Lightning Network?
Lightning Network is a blockchain-based payment protocol. With the protocol, instant transactions can be made by users. By design, Satoshi Nakamoto implemented a number of the building blocks needed to make transactions fast. Over time, developers have discussed the possibilities of bringing Satoshi’s idea to life. In 2015, two young developers (Joseph Poon and Thaddeus Dryja) enhanced Satoshi’s initial design by offering the idea of a decentralized network based on lightning-fast transactions.
Image Source : https://pixabay.com
The Lightning Network system has features to bolster its service, these features include:
Instant Payments: Users can carry out instant blockchain payments, and not be bothered about block confirmation times. Smart contracts are responsible for the security, and they do not create a transaction on the blockchain for each payment. The payment speed is measured using seconds or milliseconds.
Low Cost: Transactions using Lightning Network take place off-blockchain, thereby allowing for incredibly low fees, with this feature, instant micropayments are possible.
Scalability: Lightning Network is able to process as much as millions or billions of transactions/second over the network. Legacy payment rails are off limits. Also, users can attach payment per action/click without custodians.
Cross Blockchains: This enables atomic swaps between blockchains and can happen instantly off-chain with rules that apply to mixed blockchain consensus. There is the possibility of making transactions between different blockchains without the interference of a third party custodian (this depends on the chains’ ability to interact with the same cryptographic hash function)
How it Works
Basically, the Lightning Network works using the blockchain technology. It uses real blockchain transactions along with its smart contract scripting language, this enables it to create an environment where users can do high volume transactions at high speeds.
These are the functions involved in the working of the Lightning Network:
Bidirectional Payment Channels: Two users who have created a ledger entry (on the blockchain) would be required to sign off on any disbursement of funds. Transactions can be created by both users, and then the ledger entry gets refunded to their individual allocation. However, the transaction does not get broadcasted to the blockchain.
Lightning Network: With the creation of a network involving the two-user ledger entries, there is the possibility of locating a path over the network (like routing packets on the internet). The nodes found on the path cannot be trusted because payments are enforced with a script that implements atomicity through the gradual release of time-locks.
Blockchain as Arbiter: Off-blockchain transactions can be done without limitations, basically, it means off-blockchain transactions happening with on-blockchain implementation. With parsable scripts and transactions, there is an enforcement of the smart contract on-blockchain, which yields a deterministic result.
Benefits
Theoretically, Lightning Networks will be responsible for the value, security and general acceptance of the Bitcoin, but it will not have high fees and slow times for carrying out transactions. Also, by transferring all the small transactions to the Lightning Network, the load is reduced to the level 1 blockchain, thereby improving fee costs and transaction times on the blockchain.
Conclusion
The Lightning Network is currently being created for Litecoin, Bitcoin and Vertcoin, and is still in testnet. Developers are still working to come up with applications and interfaces that will make the system intuitive and easy to use.
Lighting network is the thing which is going to push the crypto markets back up to new highs!
I hope so. The wide mass only knows bitcoin and therefor bitcoin has to settle down on the volume market. Hopefully this helps then also to improve the reputation of all cryptocurrencies
Good overview. I'm hoping the different nodes will vote it into use soon. We could use some positive updates in this world.
Great Explanation about the Lightning network. I think price will Pump like crazy if it will be realeased. I can imagine that this will be enough to make big deals with Bitcoin. Amazon, Facebook or other big companies will hopefully join.
The Lightning network already has 1889 nodes and still growing, the end of january there were only a couple of hunderd. Check the stats here: https://explorer.acinq.co/#/
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvote this reply.
The Lightning Network is a system that is being built on the basis of Bitcoin blockchain which enables quick and cheap payments directly between two parties. To achieve this quick and cheap transaction, the following steps are taken:
A multi-signature wallet that holds some amount of bitcoin (provided by at least one of the two sides) is set
The wallet address is then saved to block Bitcoin public including a balance sheet (smart contract) which proves how much this bitcoin deposit is owned by
Once this payment channel is set up once, it is possible that both parties make unlimited transactions without ever touching the information stored in the blockchain.
With each transaction, both parties sign an updated balance sheet to always reflect how many bitcoins are stored in the multi-sig wallet of whom
The updated balance is not uploaded to the blockchain but both parties keep a copy
Whenever a dispute or payment channel closes, both parties may use the last signed balance sheet to pay their share of the multi-sig wallet
This all sounds very inconvenient, but actually for end users there is almost no additional effort required to make a Lightning payment, all of the above will happen automatically in the background.
With this great improvement bitcoin only opens another step to innovation. The problems of scability and others will be solved by a community full of passion for blockchain technology.
Congratulations @cryptoletter, this post is the sixth most rewarded post (based on pending payouts) in the last 12 hours written by a Newbie account holder (accounts that hold between 0.01 and 0.1 Mega Vests). The total number of posts by newbie account holders during this period was 4515 and the total pending payments to posts in this category was $3051.65. To see the full list of highest paid posts across all accounts categories, click here.
If you do not wish to receive these messages in future, please reply stop to this comment.
Learned a lot about new thing Lighting Networking protocol used for fast sending and receiving currencies with low fee :D
Needed now to give Bitcoin positive news as high fees and volatility putting retailers off.