What is the Lightning Network?
As you are probably aware Bitcoin has some scaling issues, this has become more and moreapparent over recent months, transactions take longer and the fees are higher than ever meaning that micro payments are not convenient using Bitcoin. Although there has been recent developments this month with the signalling of BIP91 meaning SegWit is now locked in, the fact remains that this may still not completely solve the scaling issue.
Joseph Poon and Thaddeus Dryja wrote the Lightning Network and its intention is for users to be able to send micro payments amongst each other almost instantaneously with little to no transaction fees. They have said that Lightning Network will be able to process millions and potentially billions of transactions per second.
How does the Lightning Network actually work?
The Lightning Network in short will allow users to send and receive Bitcoin/Litecoin etc. Through a micropayment channel meaning that the transactions will only be recorded on the blockchain once the channel is closed.
This means that micro payments will now happen off chain (off the blockchain) this means that transactions will not need to be validated by miners which has always been the normal process to date with Bitcoin transactions. This significantly speeds up the entire process especially for Bitcoin as it could now compete with some of the other much faster P2P payment methods.
How SegWit benefit the Lightning Network?
The Lightning Network will not need SegWit to run but will be helped with the addition of SegWit as it will allow for an improved version of the Lightning Network.
SegWit was officially Locked in on the Bitcoin blockchain on 1st August 2017 and will compliment the Lightning Network in a few ways:
- Previously payment channels were normally limited by Tim meaning the channel would close down after x number of days … SegWit allows us to keep additional channels open for far longer and even indefinitely if needed.
- SegWit combined with the the Lightning Network will help in solving transaction malleability
- SegWit allows for something known as Outsourcing .. this is where a server is effectively delegated the task of of validating your transactions by watching the blockchain to see if anyone is attempting to cheat. Through this system they will only be given enough information to be able to do carry out this task.
The Lightning Network is still in development and while it is an exciting project we still; need to wait and see how/if it will be as effective as we speculate it could be. What are your thoughts on the Lightning Network? Will it revolutionise blockchain technology further? How will it affect the price of Bitcoin?
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