The Lightning Network and Its Intricacies
You do not want to be struck by lightning, but you would love it if it was used on cryptocurrencies. Before you think I’ve gone round the bend, here’s the thing. There is this thing called, “lightning network” crypto traders and developers are looking at solving the Bitcoin dilemma. What is this dilemma, you ask? It is the lack of scalability and the high cost that comes with every Bitcoin transaction (small) across its blockchain.
Where Were We?
Let’s go back and see some reasons traders want things to improve in the blockchain network.
- Speed : The Bitcoin network processes up to seven transactions per second. Considering that, other networks like Visa can handle 24,000 transactions per second. That leads to delays in how quickly said network can validate transactions, which progressively slows down, the more people use it.
- Fees: As payments grow, larger spenders offer higher fees to attract miners to their own transactions. Keeping in mind, this will be the same fee whether the transaction was for $10 or $100,000 – making Bitcoin unsuitable for smaller transactions.
Where are We Now?
Since its first implementation, crypto traders can rest easy now. The Lightning Network is a system of channels allowing people and companies to move money with each other without the need to use the blockchain to verify transactions. The ‘second-layer solution’ built on top of the Bitcoin network means it is separate from the Bitcoin network, yet interacts with it.
Nodes maintain the network to keep it decentralized. In fact, you could set up your own Lightning Network Node right on your personal computer if you have the know-how. You could even do it off the grid with solar power and harness the beautiful African sun while at it.
Here’s how: First, download an Eclair onto your computer or a homemade Raspberry Pi and run it. A browser extension like Lightning Joule will come in handy to help you connect your Lightning node to your browser making payments within Opera, Brave, Chrome and Firefox. Alternatively, you can use a Lightning wallet on Android and iOS. Now you’re on your way to make payments to anyone who has a Lightning wallet. Overall, the total network capacity has grown by 40.7% in 2020, while the average capacity of each channel has grown 22% to reach $331 over the period.
Here’s a visual of how big the Bitcoin Lightning Network really is.
Distributed Lightning Network nodes (2020). Photo Credit: Blockchain Caffe
Where Will We Be in the Future?
It certainly comes with its limitations and drawbacks with the first major hack on March 20, 2018, yet it grew from there. Lower transaction fees on any cryptocurrency would increase mainstream adoption to popular exchanges and platforms. Already, a wide range of platforms are currently operating with the network from cryptocurrency exchanges like Bitfinex and MercuriEX, online retailers and merchants, including some casinos and other service providers.
Did you know, the more nodes and channels on the network, the easier it is for larger transactions to complete? All you need is a computer and an internet connection. And that connection can be off the grid (with a solar-powered laptop) if you have many power cuts. So get right into it and start making some nodes. A deeper understanding of its whitepaper and its applications would do.
Disclaimer: This article is a light summary of the Lightning Network because it is rather exhaustive. We ask that you research much more into this to get a full view of the deeply complex subject. As ever, this content is for informational purposes only, and not for financial advice. Happy hunting readers.
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