The idea of scalable off-chain channel to be created on top of the Bitcoin network came about in 2015 as described in a whitepaper by Joseph Poon and Thaddeus Dryja. After some time, people realized it was revolutionary, as a matter of fact, Bitcoin, as compared to other cryptocurrencies in terms of the faster transaction, is worse than we could imagine, it processes 7 transactions per second. As compared to other cryptocurrencies, Ethereum can process approximately 15-20 transactions per second, DASH can process 46 transactions per second, Litecoin can process 56 transactions per second, Bitcoin Cash can process 60 transactions per second. As compared to Bitcoin which can only process 7 transactions per second, you can only realize that the Bitcoin network is pretty slow. We have always hoped that one day Bitcoin will be the world number one payment processing system to be able to achieve this, we already have VISA Bitcoin must be able to process faster than VISA because as at now VISA is the world biggest payment processing system which can process about 24,000 transactions per second. Considering this, you will realize Bitcoin is left behind looking at the wider range of the transaction it can process as compared to VISA. Not only becoming the number one payment processor in the world but considering other factors like transaction fees, overloading the Bitcoin network with a lot of transactions slowing it down, mining of Bitcoin becoming complex because of how overcrowded and slow the Bitcoin network get and a lot more factors. Considering all the factors that will hinder the Bitcoin Blockchain in the near future, the best solution the Bitcoin community came out with is being able to scale the Bitcoin network to outgrow the current network to be able to process more transaction than the currently existing one. So basically, the whole idea of Lightning Network was to get Scalability for Bitcoin because the current Bitcoin network cannot cover the world’s commerce in the near future and to achieve more than the capacity VISA could process.
What is The Lightning Network and How Does It Work.
The current solution to micropayment that overload the Bitcoin network and scalability is to offload some of the transaction made on the Bitcoin network. So the lightning network comes in, as a result, to create a layer on top of the Bitcoin network off the chain as a payment protocol for peer to peer transactions. Actually, as explained in the Lightning Network whitepaper, the channel that will be created on top of the Bitcoin network is not separate from the main Bitcoin network. It ensures transaction speed, features micropayments, reduces transaction cost, and at some point, it nullifies transaction cost at all. It goes deeper to explain the fact that it disentangles atomic swaps. For someone to be able to use the Lightning Network, first you must be connected to a Lightning Network node. Usually, since this network is more like peer to peer, two people will need to set up a channel on the Lightning Network and from there they can create a multi-signature wallet which is more compact and only allow the people who are involved in the transaction to access it. The two people involve in the multi-signature wallet creation will be able to access the wallet anytime with their private keys respectively. The two people that will be involved in the transaction will have to come to a consensus that one is making payment and one is receiving payment once they agree on that respectively they are good to go. Now let me remind you of this, all transactions happening between them are private and can only be seen by people on the same channel or those involved in the transaction and remember every transaction they do remain off-chain till the channel is closed before it will be broadcasted finally on the Blockchain. All transactions that will be done on the Lightning Channel will be broadcasted finally on the Blockchain as a single transaction. During these transactions, off the chain transaction fees are reduced as compared to the one we currently experience on the chain, and even sometimes you pay no fees at all. Whenever you use the multi-signature wallet the final balance is updated base on the last person who had an activity done in the wallet and it will be updated after the sign in as the current balance.
How Secured Is The Lightning Network and When Will It Be Used.
Though people believe this project is revolutionary since it is going to solve the problem of scalability and the fact that it can process transactions up to almost one million per second. Though it is not yet launched and operating fully, the test net is out and we have seen a couple of people trying and testing it out. Having said that, the main network has been tested with Bitcoin and it was successful. The system was specifically designed for Bitcoin but other cryptocurrencies seem to be embracing it. My only problem is the fact that everything will happen outside the Blockchain and also transactions will be limited base on the amount involved. With it looks if you want to transact a big amount you will have to perform such transaction on the main Blockchain. It seems complex to me as a matter of fact and I was thinking because it is off the Blockchain we will definitely be seeing some complications and setbacks but I am sure that is part of the reasons it not launched yet. It will really need vigorous testing quiet for a long time before it can be launched. As explained in the whitepaper am very sure to avoid any complications if the system will run smoothly the consensus aspect is very important because the two people involved in the transactions must abide by all it takes to perform a successful transaction before the channel will be closed. Because until the channel is closed then it will be broadcasted on the Blockchain. I believe it is one of the anticipated projects the space is looking up to right now and we hope for its launch as it seems to be more advanced.
I don’t really know how safe this could be and how everyone can use it because it seems not everyone can use it and we are waiting to see whether they execute everything like explained in the whitepaper (check the whitepaper out )
I Am Crypto Ras
Featured image by Brandon Morgan at unsplashed
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