What is Lightning Network?
Lightning Network is a payment network associated with the blockchain technology. With it it is possible to make payments for different amounts, even amounts less than the equivalent of one dollar. It is an immediate and safe way to make transactions for the amount you want, with extremely low commissions.
Lightning Network is a second layer routing technology, ie, it works on a blockchain network. It can be applied to any other blockchain technology that supports:
- Multiple signature transactions.
- Time locks.
- Intelligent contracts.
Lightning Network features
To have a better idea of what Lightning Network (LN) is, we must know its main characteristics:
Micropayments: it is one of the advantages that this network makes available to its users. With the implementation of LN, it is possible to send a commission for the equivalent of $ 0.30 to a person on the other side of the world, without any inconvenience. With other platforms and without the use of Lightning Network this is not viable due to high operating commissions and the impossibility of choosing small figures.
Immediateness: the confirmation time of a transaction is only seconds. Due to smart contracts, it is not necessary to send all transactions to the blockchain network. Therefore, the transactions with Lightning Network are faster and immediate and the commissions are lower.
Operation capacity: this network has the capacity to process a large number of operations without saturating the nodes in the Bitcoin network. It is estimated that its capacity is millions of operations per second.
Bidirectional payment channel. This means that two participants sign an intelligent contract. Thus your transactions are loaded individually, without the need to be stored in the chain of blocks. When a payment channel is opened or closed, it is necessary to propagate the state of the channel to the blockchain, these two operations being those registered in the blockchain and are the only ones that have a higher cost and response time.
What problem does Lightning Network solve?
The scalability problem currently puts the Bitcoin network in a hurry. And is that the blockchain associated with Bitcoin has a storage limit of just 1 megabyte per block. This has led to an increase in the cost of mine verification operations and, consequently, minor payments are highly costly within the network.
The lack of scalability is a significant flaw in the Bitcoin architecture. if one takes into account that the Bitcoin blockchain has the capacity to close a maximum of 7 operations per second. This figure is very low compared to the more than 47,000 operations per second of the Visa credit card company ( Data reported in the 2013 holiday season ).
However, Lightning Network seeks to resolve other details. Like the fact of diminishing the waiting time of at least 10 minutes for the confirmation of any Blockchain transaction. With Lightning Network the confirmation of the transaction should only take a few seconds.
Benefits of Lightning Network
Some of the benefits of implementing LN are:
- Privacy, payments within LN have more privacy than payments made in the Bitcoin network. Participants in a payment channel can see the transactions that go through their channel. They do not know who started the transaction or who is the final recipient of it.
- Security, LN makes it difficult to apply some type of control or censorship to transactions. The communication of the nodes within the network is encrypted.
- Micropayments, you can make a payment with a value of a few Satoshi or denominations under one dollar.
- Transaction speed, the confirmation time of the transactions in the blockchain is 10 minutes, this is an eternity compared to the second response in the operations of LN.
- Low transaction costs lower operating costs and makes small transactions viable. This is because it is not necessary for all transactions to be processed within the blockchain. Doing this avoids the high costs of commission for processing.
Lightning Network will serve to reinvigorate the dynamics of the network and solve the problem of scalability that affects Bitcoin. If you want to know more about Lightning Network you can read the white paper in this link.