Credits go to: Elizabeth StarkI read a great article about the lightning network and the advantages it will offer to the Bitcoin blockchain.
I would like to hear your opinions about the lightning network and when do you think it will see the light of day?
To understand the lightning network you first have to understand how a blockchain works.
Imagine if every computer had to store every e-mail in the world, to be able to receive any. That's how blockchains work.
Lightning Network allows computers to make blockchain transactions but only
storing the data they care about—
their own money.
Lightning Network is a protocol for
scaling and
speeding up blockchains. It was designed to solve some of the technical limitations of the Bitcoin blockchain, but it could be implemented on top of any blockchain.
The Lightning Network will make Bitcoin transactions significantly fasterBitcoin has still not gotten so far as to be accepted as the ultimate payment method for everyday use. The
speed and
cost of Bitcoin transactions can be one of the reasons why. That is why I hope that The Lightning Network can bring Bitcoin closer to ordinary people.
While
Visa can process
tens of thousands of transactions per second,
Bitcoin's network is limited to
less than 10 per second. Another motivator for Lightning’s development is that the Bitcoin blockchain’s “
block confirmation time” is approximately
10 minutes long. That means it takes 10 minutes for a bitcoin transaction to confirm. Further,
transaction fees on the
Bitcoin blockchain can run between
5 and 10 cents per transaction, rendering
micropayments infeasible.
Lightning Network, can enable near-instant transactions, at a rate of thousands to millions per second, with fees of a fraction of a cent (or even free).
Lightning Network is based on a technology called
payment channels. A two-party payment channel is created when both parties create a
2-out-of-2 multi signature transaction on the blockchain, with at least one party committing funds to the 2-of-2 ledger entry. Each person has one private key, and transactions spending from the ledger entry can now be made only if both keys sign. This
initial transaction to open a channel takes
10 minutes (or whatever the normal block time is), but afterward the participants
can transact with each other instantly using the funds allocated in that channel. These instantaneous transactions are made by passing signed transactions back and forth, spending from the 2-of-2 ledger entry.
In a
payment channel, signed transactions are
not broadcast until the participants want the channel to stop operating.
Here is an example of how The Lightning Network looks like in practise:Alice and Bob, create an initial transaction on the blockchain for $20, where each party has $10 of the value.
This initial allocation can then be updated, such that Alice then has $5 of the total $20 value, and Bob has $15, and so on. When the participants have finished transacting with each other,
the most recently exchanged transaction signature is broadcast to the network, finalizing the movement of the funds in the channel—some to one party and (if any remain) some back to the other.
Lightning takes the technology behind payment channels and creates a network of these channels, using “smart contracts” to ensure that the network can function in a decentralized capacity without any risk. As an example,
Alice may open a channel with
Bob, who in turn has a channel with Carol, who has one open with Dave.
If Alice wants to transact with Dave, she can send funds via Bob and Carol, and Dave will ultimately receive them. But, because of multi signature and smart contracts inherent in the design of Lightning, Alice doesn’t need to trust Bob and Carol as intermediaries—the protocol uses cryptography to ensure that the funds will either reach Dave through Bob and Carol or else be automatically refunded to Alice.
Bob and Carol function as “
nodes” on the network. They function as the
servers that process the transactions on the network in a decentralized manner. Like miners, they do not have control over the funds they help move. Bob cannot steal Alice’s funds, as he will only receive the sender’s incoming payment if he has already sent the outgoing payment to the recipient. Thus, receiving a payment is dependent on having already forwarded it. Lightning payments are conditional upon disclosure of a cryptographic secret, and knowledge of that secret allows for redemption from prior nodes (when Dave redeems from Carol, Carol can now redeem from Bob).
Lightning Network can work on the
Bitcoin blockchain, on other blockchains, or it can be used to instantly transfer different assets between blockchains using “cross-chain atomic swaps.”
With Lightning,
small transactions or payments can flow through the network similar to how packets flow through the Internet. It has the potential to create new use cases that were not previously possible, such as machine-to-machine payments, content micropayments, and instant asset swaps.
How do you guys feel about this, how much more until the lightning network is released?
I think this will be the signal for new capital entering the crypto world and imagine the possibilities if all popular blockchains adopted this idea and in the future every transaction would happen in the blink of an eye at almost no cost!?!
Credits go to: Elizabeth Stark
