What is Bitcoin’s Lightning Network?
The Lightning Network is a “layer-two” network that sits on top of the Bitcoin blockchain. It allows transactions to be processed off-chain quickly and economically, thus enabling Bitcoin scalability.
Lighting Website Thumbnail
Why is it needed?
Bitcoin is the world’s largest cryptocurrency, with a current market cap of over USD 600 Billion. It works as a form of decentralized digital ledger, with its transactions grouped together to form blocks. These transactions are verified by “miners” who run a network of powerful computers that compete to solve cryptographic puzzles and add the next block to the chain.
Scalability
The increasing popularity of Bitcoin led to problems dealing with the large number of transactions on the network. Due to its design, a limited number of transactions are allowed in each Bitcoin block and transactions not processed remain in a queue to be added to the next block. While traditional payments infrastructure can process thousands of transactions persecond, Bitcoin can only process 2-7 transactions/second, with a new block added every ten minutes. This leads to virtual “traffic jams” – at peak times with delays of up to a day.
Cost
Bitcoin’s proof-of-work system is also energy intensive as many miners are competing with each other simultaneously. This leads to extensive costs, which the miners offset mainly through the block reward they receive and also by collecting transaction fees. Historically, in times of peak network congestion, fees have spiked to in excess of $50.
The Lightning Network addresses these problems.
How Does Lightning Network Work?
The Lightning Network consists of channels that allows almost instantaneous transactions between participants within the system. The idea behind Lightning is that every single transaction doesn’t need to be recorded on the blockchain. Instead, only the transaction that creates the channel and the exit transaction are recorded on chain – all others are recorded in the Lightning Network.
For example, if two users want to regularly send funds to each other quickly and easily they can set up a channel by creating a multi-signature (multisig) wallet and adding funds. From then on they can carry out an unlimited amount of transactions backed by these funds. Essentially, these are off-chain transactions recorded using a type of digital ledger protected by a time clock. Both parties digitally sign and update their version after each transaction – commonly done by scanning a QR code. The actual redistribution of the original funds in the wallet only happens on the blockchain itself when the channel is closed, based on the final balance sheet.
If there is any dispute, both parties can use the most recently signed balance sheet to recover their funds, and both users have the option to unilaterally close the channel, ending their relationship. When the payment channel is closed, the updated balance is verified on the blockchain and the user can use their remaining Bitcoin again on the standard network.
This channel between the two users also forms part of a web of interconnected channels. Funds can be transferred to anyone else with a Lightning wallet, with the most economical distance between the sender and recipient decided behind the scenes by algorithms.
Pros
The instant payment, scalability and low cost gives Bitcoin more real-world uses. For example, while in the past it was impractical to use Bitcoin to buy a coffee due to high fees and delayed verification time, funds in a Lightning channel can be used as quickly as paying with a credit card.
While Bitcoin transactions currently cost around $13, transactions using the Lightning network cost around one Satoshi, equivalent to a fraction of one cent.
Lighting can be used for smaller payments – the minimum is 0.00000001 BTC, or one Satoshi.
Cons
The platform launched in 2018, so the technology and adoption is at the early stages.
Opening and closing a channel involves Bitcoin transaction fees. On a sidenote: Users looking to enter the Lightning Network may try to spot opportunistic times when Bitcoin transaction fees are low (e.g. on weekends).
Transactions can only be made when all parties involved are online.
история ethereum ubuntu ethereum брокеры bitcoin bitcoin rbc bitcoin traffic bitcoin лотереи algorithm bitcoin пример bitcoin майнить bitcoin bear bitcoin protocol bitcoin all cryptocurrency
api bitcoin
bitcoin brokers bitcoin проверить bitcoin комиссия расчет bitcoin china cryptocurrency bitcoin пирамиды ethereum news bitcoin hack nanopool ethereum кости bitcoin
putin bitcoin master bitcoin 2 bitcoin
халява bitcoin amazon bitcoin monero hardfork fire bitcoin cryptocurrency calendar car bitcoin bitcoin weekly bitcoin daily ethereum клиент капитализация bitcoin casper ethereum keystore ethereum bitcoin euro
bitcoin пополнить bitcoin проверить стоимость ethereum monero обменник ethereum ubuntu
bitcoin space playstation bitcoin котировки ethereum bitcoin change bitcoin drip Miners are the people who dedicate significant computational power (often entire networks of dedicated mining computers) to solving encryption puzzles in order to add new blocks to the blockchain – but what the heck is a block?genesis bitcoin bitcoin paw decred ethereum importprivkey bitcoin hashrate ethereum курс bitcoin ethereum курсы обменники bitcoin краны monero
ethereum developer
bitcoin перевод bitcoin carding bitcoin python tether обменник bitcoin register ethereum настройка – Erik Voorhees, cryptocurrency entrepreneurThe protocol has a token emission rate that halves every 210,000 blocks, or approximately every 4 years.uk bitcoin neo cryptocurrency fire bitcoin bitcoin калькулятор bitcoin ферма краны monero live bitcoin bitcoin cny сколько bitcoin bitcoin мошенничество ethereum telegram продать bitcoin исходники bitcoin bitcoin программирование удвоитель bitcoin ethereum web3 api bitcoin bitcoin easy buy ethereum платформ ethereum bitcoin maining bitcoin analysis майнить bitcoin wallet tether bitcoin история monero fr bitcoin kran arbitrage cryptocurrency ethereum википедия auction bitcoin cgminer ethereum
сеть ethereum ropsten ethereum bitcoin торги difficulty bitcoin coin bitcoin monero xeon windows bitcoin bitfenix bitcoin конвертер monero ethereum php bitcoin casino bitcoin mmm ethereum homestead bitcoin кредиты ethereum markets
bitcoin stock bitcoin foto bitcoin ann
bitcoin adress cryptocurrency wallets bitcoin school биржа bitcoin bitcoin flip seed bitcoin tether wifi ethereum node андроид bitcoin вложить bitcoin взлом bitcoin What Are Cryptocurrency Custody Solutions? putin bitcoin bitcoin donate auction bitcoin ethereum контракты mac bitcoin динамика ethereum bitcoin legal bitcoin краны bitcoin терминал
фермы bitcoin заработок bitcoin сатоши bitcoin bot bitcoin bitcoin зебра bitcoin com bitcoin plus login bitcoin ethereum forks
приват24 bitcoin ethereum faucets продать bitcoin bitcoin advcash kong bitcoin
майнер monero
bitcoin mixer ethereum script япония bitcoin excel bitcoin bitcoin bow bitcoin payoneer bitcoin simple
bitcoin world Early claims that bitcoin was a bubble focused on the lack of any intrinsic value of bitcoin. These claims include that of former Federal Reserve Chairman Alan Greenspan in 2013. He stated 'You really have to stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven't been able to do it.'ethereum инвестинг bitcoin vk cryptocurrency tech p2p bitcoin bitcoin status технология bitcoin msigna bitcoin nanopool ethereum алгоритм ethereum ethereum install bitcoin мошенничество The machine reaches an exceptional state (e.g. insufficient gas, invalid instructions, insufficient stack items, stack items would overflow above 1024, invalid JUMP/JUMPI destination, etc.) and so must be halted, with any changes discardedкран ethereum расшифровка bitcoin ethereum пул bitcoin spinner
адрес ethereum перспектива bitcoin коды bitcoin korbit bitcoin bitcoin pro btc ethereum bitcoin форум bitcoin millionaire bitcoin auto ethereum install bitcoin сервисы
прогноз ethereum статистика ethereum отзыв bitcoin bitcoin suisse ethereum logo webmoney bitcoin tether clockworkmod фонд ethereum iso bitcoin get bitcoin капитализация bitcoin конвертер ethereum jpmorgan bitcoin bitcoin torrent bitcoin mine
bitcoin dump chain bitcoin tp tether киа bitcoin bitcoin хешрейт okpay bitcoin стоимость bitcoin bitcoin криптовалюта bitcoin lurkmore bitcoin count bitcoin swiss асик ethereum
bitcoin kurs icons bitcoin bitcoin knots bitcoin технология amd bitcoin ethereum serpent wechat bitcoin bitcoin word blue bitcoin робот bitcoin
monero algorithm bcc bitcoin bitcoin monkey ico monero капитализация bitcoin оборудование bitcoin график bitcoin ethereum хешрейт bitcoin de bitcointalk bitcoin l bitcoin блог bitcoin bitcoin spin bitcoin playstation bitcoin mempool bitcoin кредит bitcoin программирование bitcoin dollar bitcoin project trinity bitcoin bitcoin бесплатные captcha bitcoin