What is the Bitcoin Lightning Network?
A bitesize introduction
W hen Bitcoin went mainstream in 2009 it was considered to be a new kind of currency. However as more people began using Bitcoin, the network grew slower and more costly; today, high fees essentially priced out less risky applications of Bitcoin such as buying groceries. The developer group has been considering a number of solutions to the problem over the last few years, one of them being the Lightning Network.
Bitcoin Lightning Network is the second layer solution in the current Bitcoin blockchain framework to compensate for the scalability complications. A number of Bitcoin users or nodes create the network, which keep track of all transactions on their individual drives and produce it as a guide only when the record is required. Users or nodes on this network build an instant P2P channel and transact their assets with a non-existent transaction cost, almost immediately. The benefit of this is to help decongest the bitcoin network.
Currently, the Lightning network is using a unique Bitcoin network enhancement technology to make the bitcoin system more efficient. Hashed Timelock Contracts (HTLCs), an off-chain protocol that allows for bi-directional transaction options, is driving this technology. In this way, bitcoin transactions are routed and accelerated via a set of P2P payment networks, resulting in quicker approvals and execution of transactions. Faster transactions, which will bring bitcoin on a fast track to become even more popular and used in everyday brick and mortar stores. In reality, transactions can occur instantly, making Bitcoin a commonly accepted payment choice.
Bitcoin mining actually involves the use of mining hardware and computing facilities designed to solve complex mathematical problems. Unfortunately, the immense number of transactions as well as the market for bitcoins have become increasingly hard service. When a transaction is made it usually take longer due to the request backlog, known as the Mempool.
The Lightning Network is addressing this by establishing an "alternative path" where sender and recipient can choose to transfer, execute their transactions, and then update the details of the transactions on the blockchain ledger. Micro transactions will then move on to the Lightning Network, while the big transactions are processed on the bitcoin network itself. Currently “micro” payments are often not viable via Bitcoin due to the fact the transaction fees are either proportional to or outweigh the value of the payment.
One of the drawbacks to the Lightning Network is the risk of partial centralization of the Bitcoin network. The Lightning Network will depend on nodes and peers remaining online for transactions to complete, this may result in payment hubs being created rather than true P2P transactions.
While it seems to be very promising and possible solution to the scalability and congestion problems facing bitcoin, we will have to wait and see if it is living up to expectation. When it does, chances are that the way Bitcoin is used across the globe would revolutionize.