Lightning network (LN) is currently in technology Alpha phase… i.e. it’s mostly working but only if you’re rather brave and comfortable with some form of compiling code! Realistically therefore for me personally that a fair bit outside my comfort zone. Anyhow that doesn’t stop it being something which has the potential to change the future of Crypto and in particular BTC.
To understand why LN is important you need to understand a bit about the challenges inherent in the current implementation of Bitcoin. One of the major problems Bitcoin has faced is that its technology hasn’t quite managed to scale with the adoption rate. This has been one of the causes of the recent high fees and slow transaction times. Interestingly things have improved a lot recently but still, the underlying technology of BTC means that there is a limit to the speed of confirmations. Another area of concern particularly with BTC is that there is not a lot of room in the block for additional functional like smart contracts. Other coins like ETH and NEO have been written specifically with those in mind, but BTC was never designed that way. Lightning network has the ability to change all that. Finally there is still a great deal of centralisation in the BTC world caused by the need to use Exchanges to buy and sell coins. This adds a significant amount of risk and also overhead as we pay fees to move coins to the exchange and then again to buy and sell.
Lightning network has the ability to radically change many of those issues.
The basic concept is providing layers on top of the blockchain. The thing about blockchain is that it is rather good, in fact amazingly good at providing a trust less, decentralised system whereby people can interact. However it’s pretty rubbish at storing large amounts of data. Therefore the blocks are generally kept small to limit the size and load on the network. You wouldn’t for example generally store photos on a blockchain. Instead you would store the checksum giving the ability to validate the presented photo, stored on a second tier, is unchanged from the one linked to the transaction on the blockchain.
Lightning network is an implementation of this second tier. It provides clever integration (using cryptography/hashing for integrity of data), with the blockchain but allows for other functions to live off the original chain. This has the ability to allow external data to interact with the blockchain and provide the ability to have radically more scalability… i.e. instant payments, huge numbers of payments, very cheap payments and the capability to swap one currency for another without using an exchange.
These new capabilities open up the possibility of replacing existing payment networks like VISA and Mastercard and having instant tiny payments (micro-payments) driven by automated entities. This could move us to a truly pay per use type world, where your car pays for the roads it uses, you only pay for articles you read and music you listen to direct to the creator.
For more information about Lightning Network, take a look at the articles and links below:
- Lightning Network site
- For a more detailed explanation take a look at the article here.
- In addition, if you’re really interested and actually want to try this out, then the article here will take you through the basics, not that it’s very basic, of how: https://www.coindesk.com/how-to-send-a-lightning-transaction-even-if-you-may-not-want-to/