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.