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Lightning Network: Scalable Instant Bitcoin Blockchain Transactions Guide
One of bitcoin’s major issues as it grew was scalability and the ability to handle huge transaction volumes… until the development of a soft fork technology known as Segregated Witness (SegWit) that helped the bitcoin network maintain its original build, whilst being able to handle its scalability issues.
While SegWit has been handling these issues, it is becoming increasingly clear that there’s a need for an even better, more efficient solution that will adapt to scale, ensure its current bulletproof security, cost less to maintain and as well as process transactions. This is what birthed what is now known as the Lightning Network.
While it’s a new technology, and still in the process of being built, the Lightning Network has shown so much promise. For a 2.5 year old project with just three developer teams working on it full time, the Lightning Network has achieved some pretty impressive milestones, with the latest being its readiness to launch.
According to the three developer teams working on the project, the network is ready to start accepting and processing transactions at faster and cheaper rate.
What Is The Lightning Network And Why Was It Developed?
The concept of the Lightning Network was brought to bear by two individuals: Thaddeus Driya and Joseph Poon. Both described a network that helped bitcoin retain its current structure, while effectively increasing its ability to scale and handle even bigger transaction volumes.
While many liked the concept, only three developers were willing to start working on it, and have continued to do so over the last two and half years. These include Lightning Labs, Elements Projects and ACINQ.
Slated for release to the general public this year, Lightning Network will make bitcoin an even bigger force to contend with in the crypto space. This will be possible thanks to its bitcoin network enhancement technology.
This technology is powered by Hashed Timelock Contracts (HTLCs), an off-chain protocol that enables bi-directional transaction options. This way, bitcoin transactions are routed through a series of p2p payment channels and accelerated, resulting in faster transaction approvals and execution.
How Does The Lightning Network Aid Bitcoin?
The first major problem bitcoin has is its slow processing time. Compared to other cryptocurrencies and fiat currency processors, transactions on the bitcoin network are ridiculously slow.
To help you understand how slow it is, traditional payment processors like MasterCard and Visa process about 1,700 transactions per second, while bitcoin only does 3. This slow transaction speed is why bitcoin confirmation times can take really long, and inadvertently resulted in higher transaction fees.
The Lightning Network’s role consists primarily of decongesting the transaction request queue, thus eliminating the need for high transaction fees and slow processing times. Payments will be confirmed faster with the Lightning Network, while costs are cut drastically.
How Does The Lightning Network Work?
Currently, bitcoin mining requires the use of mining hardware and computing equipment that are put to task solving complex math problems.
Unfortunately, this has become increasingly harder courtesy of the huge number of transactions as well as the demand for bitcoins. So, transactions typically take longer because of the backlog of requests.
The Lightning Network hopes to resolve this creating an “alternative channel” where sender and recipient can elect to move, carry out their transactions, and then update the transactions details on the blockchain ledger.
This way, micro transactions can move on to the Lightning Network, while the huge ones are processed on the bitcoin network itself.
The simplest way to explain this is to imagine you went to a medium sized store to buy stuff, only to arrive and find the store full, with a very long queue and just three cash registers.
However, in a bid to decongest the store and expedite transactions, the store manager outsources the task to a trusted third party who then sets up 5 more portable cash registers outside the store, and then informs customers that there are multiple cash registers outside for those with less 7 items or less than $100 worth of goods in their trolleys, leaving the high ticket item buyers in the store proper.
Of course, there’s security to ensure no one walks out of the store without paying for their goods and the revenue still goes in the store’s accounts. With that in place, customers with 7 items or less can then go outside to pay and go on about their business.
Transactions will be faster, the congestion will quickly reduce and the store wouldn’t have to stay open for longer than necessary to fill all orders. Only instead of a trust based system, this third party would be trustless, and very reliable.
Pros And Cons Of The Lightning Network
As with all things, there are pros and cons. Thankfully, the Lightning Network’s pros far outweigh the cons, making it a very reliable bitcoin network support mechanism.
The Pros Of The Lightning Network Include:
- Faster transactions, which will place bitcoin on a fast track to becoming even more commonplace and used in regular brick and mortar stores. In fact, transactions will happen in an instant, further making bitcoin a commonly accepted for of payment.
- Transactions are still anonymous and encrypted, and p2p transactions will become more common
- Will up the cryptocurrency game seeing as it will support transactions carried out across multiple blockchains
The Cons Of The Lightning Network Though Are As Follows:
- Since it’s new, no one knows how long/if it will even perform as expected. The network hasn’t been subjected to extreme and widespread usage, enough to ascertain if it will still process payments very fast in the events of huge transaction volumes
- May not be user friendly at first, but might improve with time. Apps currently running on Lightning aren’t very user friendly, so this might be a bit of an issue.
- There are valid concerns about the network being able to withstand hack attacks similar to those carried out on the bitcoin network.
Conclusion On The Lightning Network
While it does seem very promising and potential solution to bitcoin’s scalability and congestion issues, we would have to wait and see if it actually lives up to expectation. If it does, chances are it will completely revolutionize the way bitcoin is used across the globe.
As with all new tech though, we do expect to see some bugs show up under extreme usage. How the developers handle this will determine if the network will survive or die. If it does, then other cryptocurrencies like Ethereum whose sole edge is its speed of transactions will most likely be threatened.
However, ethereum isn’t taking the news about the Lightning Network lightly. To that effect, the company has established a program aimed at attracting developers to come up with an even more powerful scalability tech that will further reinforce ethereum’s technology.
How that will play out only time will tell. In the meantime, enjoy the perks of the Lightning Network when it’s released, and come tell us how it was for you.
Bitcoin Blockchain Lightning Network – Faster Transaction Layer?
Blockchain technology is innovative and groundbreaking. Decentralization, transparency, and resistance to tampering all make these ledgers incredible tools for the financial technology sector. However, blockchains aren’t perfect. In fact, they’re slow and expensive – it can sometimes take hours to transfer quantities of Bitcoin from one person to another. Not only that, the ballooning transaction fees are slowly eroding the usability of the world’s preeminent cryptocurrency.
However, it doesn’t have to be this way. A new solution, the Bitcoin Blockchain Lightning Network, is poised to level the playing field when it comes to using slow and expensive blockchains. But first, some background.
Does Bitcoin Blockchain Lightning Network Solve the Problem of Scalability?
The issue with blockchains is that as they get larger and more complex, it takes more time and effort to get things done. Blockchain scalability has always been a problem. If you think of a blockchain as a ledger, it’s easy to see why – each page of the ledger has a number of transactions on it. Once the page fills up, it needs to be added to the ledger before turning over a new leaf and starting the process again.
For the Bitcoin blockchain, each page (a block) has to be processed before it’s added to the ledger (the chain). This process involves reaching consensus with all the nodes running the blockchain, and this process can take around 10 minutes. Unfortunately it gets a lot more complicated from there.
Paying for Quick Transactions
With every movement of digital currency across the blockchain, there’s a record of the transaction. It contains all the information the ledger needs – how much is being sent, who’s sending it, and who’s receiving it – as well as what the fee is for the transfer. Transaction fees aren’t standardized; in fact, if you choose to pay a higher transaction fee, your transaction gets prioritized and moved to the top of the queue.
Of course, the opposite is true as well. If the transaction fee you choose to pay is low on the totem pole – if there are dozens or hundreds of transactions that have a higher fee than yours – you’re going to have to wait until the blockchain fills up on high-paying blocks before your transaction gets processed. Ironically, the more people use a blockchain, and the more popular it becomes, these transaction speed and fee problems just get worse and worse.
The Solution to the Problem
So where does Lightning Network come in? The technology revolves around a simple but effective philosophy: not every single transaction needs to be immortalized in the blockchain.
Yes, it’s true that part of the blockchain’s allure is because it’s a complete record of every single transaction. But if that feature becomes a hindrance, you can make a case for suspending it under certain circumstances – such as when two individuals carry on several transactions over time. In this case, it’s not necessarily as important to record each single exchange.
So how would Lightning Network resolve and streamline this process? By recording the opening of a “payment channel” between two parties on the blockchain – a not-so-secret passage that circumvents the need to record every electron as it transfers.
Payment channels can stay open, like a Star Trek wormhole, for as long as they’re used for. Then, when all transactions are finished, the channel closes and the blockchain records just one overall transaction instead of dozens of little ones.
Think of it this way: you and your best friend open a payment channel between the two of you. You’re helping him buy a car, so you send him a couple of Bitcoin. Then, he buys the car and sends you the Bitcoin you loaned him, but over the course of a few days. Using the payment channel, the Bitcoin you sent him and the Bitcoin he sent you back is all recorded in one transaction once you close the payment channel. One transaction, one fee, one entry on the blockchain. It’s fast and easy.
More Payment Channel Examples
The best way to describe a payment channel, for those who still aren’t sure of it, is looking at it as a safety deposit box with two keys. Only you and whoever else has a key gains access to it.
Opening a payment channel – or one of these deposit boxes – revolves creating an “opening transaction” where you and whoever else is using the box make an equal deposit. The double lock ensures that one person can’t make off with the cash without the input of the other.
Promise of Ownership
These transactions work on a “promise of ownership” model. The money in the box is used for transactions. Once you both fund the payment channel if you want to pay your friend, you promise to pay them out of your stash and vice versa.
Here’s a good example. There’s 20 BTC in your payment channel – 10 BTC from you, 10 BTC from your friend. You want to send 2 BTC to your friend, so you promise 2 BTC from your stash to your friend. Then, when you both open the box, your friend has access to 12 BTC and you have access to 8 BTC.
Pandora’s Box It’s Not
The thing is, you don’t have to open the box right away. Opening it up closes the payment channel. Instead, you can simply continue to make transactions – promising different amounts of BTC to each other – until your business is concluded. You’re just pooling your funds with someone else, and then deciding how the pool is divvied up when it’s time to cash out.
Once the box opens, those promises of ownership go into effect. Whatever the final balance is between you and your friend is the transaction recorded by the blockchain.
So Where Does Bitcoin Blockchain Lightning Network Come In?
So a payment channel is a peer-to-peer feature. Powerful, but seemingly limited. But when you combine more than one payment channel together to work in concert, the resulting network – the Lightning Network – is what emerges.
The shift from value in ownership of Bitcoin in a payment channel network to the promise of ownership of Bitcoin is a major sea change. Imagine this – instead of just a payment channel between you and your friend, there’s also a channel between your friend and his mom.
You’re not connected directly to his mom, but you are connected to her through him. You want to send her some Bitcoin, so you send a promise of ownership, through your friend, to his mom, in a chain that completely bypasses the blockchain but still gets recorded when all the payment channels close.
Is Bitcoin Blockchain Lightning Network Fast and Scalable?
There’s really no limit to the number of payment channels that can exist in a network. In fact, the more payment channels there are, the more opportunities for a transaction to get routed quickly from one person to another.
This has the potential to free up massive amounts of a blockchain’s bandwidth, speeding up every transaction – and cutting back on fees as well. That’s exactly how Bitcoin Blockchain Lightning Network functions – and how it’s going to revolutionize blockchain technology.
How Do Bitcoin Lightning Network Apps Work? Let's Explore the BTC LN LApps World
The Lightning Network, a player 2 protocol for Bitcoin has been expanding of late. Nodes, channels and network capacity are all increasing at a quick pace showing that the public is becoming agitated for work to progress faster. This is because it is a peer-to-peer mesh network that allows a lot of applications to be built on top it's architecture.
LApps Are Multiplying Already
Despite not being officially released and many industry observers are saying that a full-flavored version of the protocol is still a ways off yet, the community is not sitting on its hands. There has been a recent proliferation of apps made specifically for Lightning which are now being called LApps, much like dApps used for general blockchain applications.
These Lappe are very diverse for such an early emergent technology that is not even close to finally being released properly. While the mass adoption of Lightning still a ways off even in the Bitcoin sphere, it is heartening to see real progress being made on the technology itself. These improvements in the tech itself and in the tools, applications and educational resources to boot will allow mainstream users to more easily tap into the immense capabilities of Lightning.
While at its core, Lightning is just a network that facilities bi-directional payments between bitcoin users, of course with P2P and off-chain being important parts of the protocol, many might see a limited number of apps that could be made for it. The community around Lightning, however, has seen a creative explosion.
Wallets In Lighting
If you want to use the benefits of Lightning, you need a compatible wallet. The problem with wallets in the earlier days of cryptocurrency is that they had problems with UI and UX. However, there has been steady progress in the field of wallets, and they are now available in a variety of forms with great Uis to boot.
Development Tools For Lightning
The proliferation of developer tools is a sign that open-source technology is gaining wider and wider acceptance. These can be anything from API integrations to whole new frameworks, but what is definitely the key here is that the increase of quality developer tools means Lightning is growing quickly.
- Bitcoin Visuals – Metrics and Charts for the Lightning Network
- LightningJ – Java integrations for lightning
FileBazaar – Digital file Lightning Network paywall
- Bitrefill – prepaid phone/gift card refills using Bitcoin or Lightning
Blockstream's Elements Project Repo has a number of ongoing projects where interested developers go to understand how LApps work.
LN is great for many things, but the industry as a whole thinks that the best use of LN is in e-commerce. Merchants being able to set up cryptocurrency payments without a hassle and without having to get a degree in Engineering is what these LApps aim to do. More and more integrations are on their way with WooCommerce and Magento already on the list.
- BTCPay Server – This is an open source, self-hosted server. Great for tech-minded entrepreneurs.
- NanoPoS – Lightning Point of Sale system.
- WooCommerce Plugin – A plugin for one of the largest e-commerce platforms in the world.
- Tippin.me – A great little tool to get tips via the Lightning networks
These are just the tip of the iceberg when it comes to e-commerce enabled LApps. The quick adoption of these LApps has shown that cryptocurrency is far more acceptable today that it was just a few short years ago. The Lightning Network and all the features it brings will expand the e-commerce landscape even more once viable crypto to fiat exchange becomes easily available to most merchants.
Gaming With Lightning
Games give an excellent view of how emerging technology can be used in unusual ways. Gamers will always try something new, just to have a bit of fun and independent game developers doubly so. While other industries are founded on conservativism and move slowly with technology modern gaming only came about because developers would use the latest and greatest technology to it's fullest to gain market share.
- Starblocks – A virtual coffee shop that has a familiar look to it
- Thunderdice – SatoshiDice, but off chain. Just how Lightning likes it.
- HammerCoin – an RPG based on the Lightning Network
The more functionality that is added to the Lightning Network, the more games will be developed for it. It can be guaranteed that at least one of the killer apps for any emerging platform will be a game of some sorts.
Best Wallets for The Bitcoin’s Lightning Network (LN)
There has been a lot of progress on the Lightning Network since its launch on 15th March 2018. Exactly a year later, the second layer payment network built on the Bitcoin blockchain boasts of 7,383 nodes, 39,242 channels and a capacity of 1,056.82 BTC. In the weeks following the launch of the Lightning network, some blockchain experts advised that users test the network with small amounts of bitcoin to avoid any potential loss of huge funds that may occur due to vulnerabilities. Lightning transactions also appeared to be beyond the technical abilities of the average bitcoin user at the time. Today, the technology is much easier to use as a number of wallets have been built to allow non-tech savvy users to easily send and receive bitcoin on the Lightning network.
The second layer was built as a solution to congestion and high transaction fee problems on the Bitcoin network. It solves these problems by enabling users to send bitcoin to each other at very low fees and without requiring the transactions to be processed on the main Bitcoin blockchain.
Individuals interested in using the Lightning network can check out any of the wallets discussed below. None of the wallets discussed require users to run their own full node. Neither do users have to grasp the technical details of making Lightning transactions. In addition, all the wallets listed are open source and thus available for free. Lastly, the list of wallets below includes only non-custodial wallets. This means users of the lightning wallets listed below have full control of their private keys and funds.
Eclair mobile wallet, one of the most popular Lightning wallets on the Android operating system (OS), is known for its user-friendly interface. The mobile wallet comes with a Lightning node that runs on the user’s mobile phone thereby making it unnecessary for the user to run one himself. Unfortunately, the app was taken off the Google Play store shortly after its release in April 2018 due to the loss of private signing keys needed for making updates. With the exception of this drawback, the Eclair Lightning wallet has proved to be one of the best. Behind Eclair Mobile is ACINQ, a bitcoin technology company with a focus on tackling the scalability problem.
Bitcoin Lightning Wallet
The Bitcoin Lightning Wallet (BLW) is an all-in-one Bitcoin wallet that supports both Lightning and traditional Bitcoin transactions. BLW runs on the Android OS and is one of the most widely recommended Lightning wallets. It also comes with a in-built Lightning node and facilitates both sending and receiving of Bitcoin on the Lightning network. Because BLW is a standalone app, any funds stored on it will be kept on the user’s phone only. This gives users 100% control over their bitcoins.
Bluewallet, which is marketed as an “easy to use and secure” is one of the few Lightning wallets available on both iOS and Android. The wallet gives users complete control over private keys and also allows them to select their own fees. Additionally, the replace by fee (RBF) feature makes it possible for users to further speed up their transactions. Watch-only-wallets can also be set up. This feature allows users to monitor their funds in cold storage without unnecessarily exposing their private keys. The Bluewallet team plans to add features like Batch transactions and multi-signature transactions in the future.
In addition to fast transactions between individuals, Breeze Lightning wallet focuses on payments to merchants. Breeze has developed a point of sale app based on Near Field Communication (NFC) technology to facilitate the receipt of instantaneous payments by merchants. The goal of Breeze is to promote Bitcoin adoption by using the Lightning network to provide fast, simple and secure transactions. The app is currently available on Android.
The Lightning Peach wallet is available on almost every widely used OS. The app can be used on Android, iOS, Mac, Windows and Linux devices. Bitfury Group, the company behind Lightning Peach, provides additional services for merchants seeking to process bitcoin transactions at a low cost. There have been some privacy concerns raised with regards to Lightning Peach but they have since been addressed by the Bitfury engineering team.
Bitlum is an online bitcoin browser wallet that can be easily installed within two minutes without any additional software requirements. There are few reviews of this non-custodial and open source Lightning wallet since it has been around for only a month. However, a 24-hour customer support service is provided to address any issues users may have.
Bitcoin users looking for Lightning wallets developed in a transparent manner and wish to have full control of their bitcoins can choose any of the wallets listed above. In addition to being open source and non-custodial, they require little to no technical know-how.