One of the drawbacks to Crypto has been the ability to keep up with its own popularity. The main bottleneck for Bitcoin has been its 3 to 7 transactions per second compared to VISA at 1700 per second.
It creates 1 block every 10 minutes and each block has a 1 megabyte limit. Litecoin has decreased the time to 2.5 minutes per block but this is still a problem. Lightning network to the rescue.
In the beginning when there were very few users Bitcoin's blockchain worked just fine. In late 2017 it became a big problem as the price went up to $26 for one transaction.
The higher the fee you pay the better chance of being picked up by a miner for the next block added to the chain. Otherwise you had to wait for your transaction for long periods of time. The lightning network is a 2nd layer solution that is designed to work outside the blockchain thus bypassing this bottleneck.
The Lightning Network is a solution that allows millions and millions of transactions per second. It works offchain meaning it does not need to use the block/mining system to create transactions.
Bidirectional payment channels are created between two parties or nodes and when combined they become a smart contract. If either node drops then it falls back to the blockchain as a regular transaction.
This technology is still in its infancy and thus a work in progress. The exciting part is that it works, it just needs to grow just as the internet took time to become what it is today.
The internet now has 20 or 30 different protocols which were invented for specific uses, although it started with basic protocols such as TCP/IP, SMTP and FTP.
The lightning network uses Source routing, which means it maps out the route then sends from node to node until it gets to the destination. The intermediate nodes do not know the source or destination as encryption is used for each layer, they just know the next node in the route.
Since this technology was only invented in 2016, you can imagine this will change quite a bit over the months and years to come.
Basis of Lightning Technology or BOLT describes the layer 2 transaction breaking it down into 12 specific areas.
BOLT is an agreed upon technical specification so the lightning network can become interoperable and stay that way even though various entities are changing the network for their own needs. This is a big deal as each change and growth can come with unforeseen consequences which can break down the interoperability.
If you want a deep dive on Lightning Network I suggest Mastering the Lightning Network.
Feb 20, 22 11:33 AM
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