With the introduction of Lightning Network (LN), evolution of cryptocurrencies will be faster. It has been conveyed that once it is deployed across all nodes, the Network, it will give a boost to transaction processing speed and decrease the associated costs on Bitcoin’s Blockchain. But what is this Lightning Network anyway? Read further and sate your curiosity!
What Is Bitcoin Lightning Network?
It was proposed by Thaddeus Dryja and Joseph Poon in a 2015, and is defined as the one potent solution to cryptocurrency scaling. It has been conveyed that the Lightning Network creates a layer on top of Bitcoin effectively, and thus enables fast and cheap transactions that can settle to the Bitcoin Blockchain.
How Does It Work?
Initially, the two parties that wish to transact with each other set up a multisig wallet, the one in which more than one signatures are required to initiate any transaction. This wallet address is then saved to Bitcoin Blockchain and eventually this sets up the payment channel without much hassle. Now, the parties can transact easily without touching the information on Blockchain. Also, with each transaction, both sign an updated balance sheet reflect the amount of Bitcoin stored in the wallet and details about ownership as well. Furthermore, when the transaction is completed, they can close the channel, and the balance will get registered on the Blockchain. In case any dispute arises, both parties can have a glimpse at recently signed balance sheet in order to recover their share.
Is It As Efficient As Expected?
Well, this level of perfection is hard to attain. There are a few complications in this, and they are discussed in the points that follow.
It will not entirely solve the problem of Bitcoin transaction fee. Basically there are two parts of cost in any Bitcoin transaction.The first part consists of a fee that is equivalent to Bitcoin’s transaction charges, and is used to open and close channels between the two parties. Additionally, a routing fee is also required to transfer payments between channels. In the current scenario, the latter fee is zero. The reason behind this is that there are very few nodes using Lightning. However, the cost will increase and then it will be proven that this tactic is not as efficient as it has promised to be!
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Being online or offline, both have downsides in the Lightning Network. You cannot stay online every time as it will make your wallet susceptible to attacks. Moreover, cold storage that is considered to be the safest mode for storing cryptocurrencies, is next to impossible on LN. being offline can give rise to “Fraudulent Channel Close” and also bring down the network. Even the Bitcoin’s Network Problem won’t be solved.
Where Do We Stand?
There is no denying the fact that this was originally designed only for Bitcoin, but the technology is being currently developed for other cryptocurrencies as well. Litecoin, Stellar, Zcash, Ether and Ripple are a few of them. Last year in December, several startups started working on this. And the results from three most influential ones were revealed. It depicted that their software is interoperable. Impressive indeed! However, their network is yet not ready to be launched. The professionals have to release software and improve it in order to make it apt for use. Several apps that support Lightning as a payment method have already been introduced, but they are not at all user-friendly. Also, this has been discouraged a lot by experts as they not only distract the developers, but also put funds of the users at risk. The bottom line is that there’s a need for rigorous testing.
Is This a Promising Concept?
Well, definitely! And, it will make a significant difference to Bitcoin’s Blockchain and others as well. But it is not a silver bullet to any of the current problems. Furthermore, the introduction of this can also lead to other complicated issues in the ecosystem of various cryptocurrencies. All depends on how the technology’s features and research shape the future. Keep your eyes open for this fellas!
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