Bitcoin growth has brought with it a number of new challenges. In order for cryptocurrency to become a wide-ranging and widespread payment method, it needs to be transformed and adapted to the needs of its users, especially in terms of settlement times and commissions.
Bitcoin has great potential, but it is still far from being able to become a competitor on a par with other traditional payment methods... for the time being. The advent of the Lightning Network protocol could solve many of today's network problems, especially related to slow processing of transactions and high transaction fees.
¿WHAT IS LIGHTNING NETWORK (LN)?
LN is a protocol that will function as an alternate layer to Bitcoin's blockchain and that will allow the creation of alternate payment channels that will run directly between the interested parties, speeding up the execution times of the operations. The aim is to free the blockchain congestion with this layer, where micropayments and their execution will be the main protagonists. In this sense, we intend to use LN for the execution of movements of up to 100 dollars, making better use of all its potentialities.
The original idea is by Joseph Poon and Thaddeus Dryja, who presented the project's White Paper in 2016. Since then, this solution has aroused the interest of the community, which continues with great expectation the irruption of LN, whose network is currently being tested.
The implementation of LN will help to increase the processing speed of the transactions registered in the blockchain, during the time that the payment channel remains open and, once closed, the transactions will be charged to the block chain as such. This is a transaction protocol of 0 confirmations, so miners are only involved in the opening and closing of payment channels. Fees are handled as a percentage of the transactions made.
¿HOW DOES LIGHTNING NETWORK WORK?
LN's central argument is that most payments do not need to be registered in Bitcoin's blockchain, and private channels between users would work just as effectively.
If only two participants are concerned about a daily recurring transaction, it is not necessary for all other nodes in the bitcoin network to know about that transaction. Instead, it is preferable to have only minimal information about the blockchain. Joseph Poon and Thaddeus Dryja White Paper, Lightning Network
Thus, LN's goal is to transfer most of the micro-payments made to private channels and register them only after facts in the blockchain.
In this system, two parties open a micropayment channel and allocate a certain amount of funds to it. When you open this channel, the information is transmitted to the blockchain as if it were any other transaction, with its commissions and its registration in the network, and this payment channel can remain open for any length of time. As long as a channel remains open, payments within it are free.
Micropayments channels create a relationship between two parties to constantly update balances, deferring what is transmitted to blockchain in a single transaction that offsets the total balance between those two parties. Joseph Poon and Thaddeus Dryja White Paper, Lightning Network
When the set time expires, the channel closes and transmits the final status of the pair's transactions to the blockchain, re-recording the transaction on the network. In the event of suspected swindling or fraud in channel operations, either party may transmit the contested transaction to the blockchain, where other users can verify this information, miners can update the record and the offender loses funds.
But when these channels remain open indefinitely, LN reveals a new potential: users have a greater reach, being able to execute payments and transactions through this protocol throughout the network, without the delay of registering operations in the blockchain. The execution of these transactions takes place in the extension of the created channel networks.
This means that a user only needs to open and pay transaction fees for a small number of private channels in order to be able to operate across the entire network, made possible by Lightning Network's underlying code, which can find a route between a user's immediate connections and link to more distant parts. Thus, through the protocol tools, the user would instruct the network to direct its money to a recipient that is not part of its channels through its existing connections. This type of operation would mean a small fee proportional to the size of the payment, giving a new impetus to small bitcoin transactions.
If the system is successful, Bitcoin's current performance could change significantly. In this way, miners would only confirm transactions on the spot when a user indicated the need, creating a new channel and most of the payments and operations would take place in private. In addition, micropayments would eventually become viable, making it possible to pay for pizza, coffee, a telephone bill or tips, for example.
Now, let's imagine a daily situation for the use of this protocol: Mary is the boss of Luis and wants to send him a certain amount in bitcoin. To this end, they decide to use LN's payment channels.
To open the payment channel, set the maximum balance that will be mobilized through this channel. Once opened, Maria can send the amount of bitcoins she wants to Luis and vice versa, and the final balance of the channel will be updated with each operation.
The channel can be closed by users at any time and the balance will be paid to the appropriate party. Channels can remain open and be used to create greater connections across the network. So, assuming that Maria wants to send other bitcoins to Pedro (who is connected with Luis), she would not need to open a direct payment channel, she could take advantage of the one Luis already has, and Luis can charge a small commission for this extension of her channel.
¿HOW WILL BITCOIN IMPROVE WITH THE LN APPLICATION?
Bitcoin is called to significantly transform global finance. However, in its growth it has faced great difficulties, especially associated with the delay in settling transactions and the high fees for their execution. Massive adoption and transformation of bitcoin into the world's most widely used payment method is still a possible horizon, and LN can help make it happen.
Current status of the main LN network. Source: Lmainnet
The implementation of the protocol can help significantly reduce the number of transactions recorded in the blockchain, making better use of block space and reducing network congestion. In addition, the fees, currently in the order of $18, would be reduced to just a few cents with the enabling of alternative payment channels, two very important elements for a truly massive adoption of bitcoin.
Using a network of these micropayment channels, Bitcoin can scale to billions of transactions per day with the computing power available on a modern desktop computer today. Sending many payments within a given micro-payment channel allows you to send large amounts of funds elsewhere in a decentralized manner. Joseph Poon and Thaddeus Dryja White Paper, Lightning Network
Pledges on instant and very low-cost payments could be fulfilled, giving a very significant boost to bitcoin and the rest of the cryptocurrencies. LN is currently running on about 69 nodes that support its core network. Approximately 135 payment channels have been generated in this network, which are mobilizing around 1,354 bitcoins, with commissions in a percentage according to what has been mobilized in each payment, generally less than 1 cent.
In addition, companies such as Y' alls (article writing), TorGuard (online privacy) and Bitrefill (mobile top-ups) have already made bitcoin micropayments with their mainnet, using amounts below 1 dollar per transaction.
The development of the protocol has Blockstream, Acinq and Lightning Labs as the main work teams, and the growth of the main network, despite the fact that the protocol is in testing phase, allows us to foresee that it will have an important reception.
Source: www.criptonoticias.com
Really enjoyed reading this... I am upvoting and sharing. Thanks bud! Keep up the great work.
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This is an excellent post. I was a bitcoin miner from the beginning and fully understand the technology. I think the lightning network is the perfect solution and believe in it completely. Thank You for sharing this fantastic information.
Thanks to you for reading my post, my friend @daviddivergent
You are very welcome! I really enjoyed reading your post!
this post really nice
I'm thinking .. in times of criptos with immediate transfer, with zero fees, if the LN would not be a delayed evolution
Although, at the point we are in, any update would be welcome
Correct my friend, welcome to every viable update...
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Thanks @emmanuel250998, I have read your post. I appreciate your post, this is a nice post and good information.. @aafadjar
Thanks to you my friend @aafadjar :)
nice article.
Hope it gets implemented soon, delay is frustrating and transaction fee is approaching all time high.
Thanks my friend @ajai. I also hope that this update will soon be implemented. I look forward to lowering the price of commissions.
Excellent information, and the single best description of Lightning Network that I've come across to date. Guess I'll have to read the white paper now.
The inability to handle micropayments, not to mention the huge fees and long lag times before confirmation, are the major reasons I've been leaning toward other cryptos and MOL away from Bitcoin, though I'm still bullish on it long term.
But even more than that, it is the privacy of the Lightning Network transactions that are the biggest draw for me, as I am a long time privacy and security advocate.
Looking forward to further updates. Upvoted and followed.