4 Points To Understand Lightning Network, Bitcoin 2.0!
At a time when bitcoin prices have been struggling since the beginning of 2018, it is important to consider the future. An uncertain future: sunny, cloudy or stormy? The only certainty, bitcoin continues to be the locomotive cryptocurrency since almost all of it follows its course, upward as downward.
This temporary gloom could be mitigated by the arrival of Lightning Network . Lightning what? To summarize in one sentence, it is a question of improving the fluidity of the bitcoin blockchain . Piping a little clogged by a number of transactions too important for her. As if your bathtub was draining its water in an hour instead of a few seconds . It works but not as we would like; The goal of Lightning Network is to allow emptying again in seconds!
Here are the essentials of what you should remember in 4 points.
How to clearly define the current problem?
The difficulty is related to the scalability of bitcoin . This somewhat barbaric word is the ability to adapt to an exponential increase in demand without suffering any adverse consequences in terms of performance. In other words, when the request goes from 1 to 100, you have to be able to answer in the same way, regardless of whether there are 1 or 100 applicants. It requires a processing time and a transaction at the same cost or, at best, at lower cost. Now, the least we can say is that bitcoin is not a scalable .
It is not scalable because the records of a new block in the blockchain (“blockchain”, you understand the principle) are limited to one megabyte (MB) and a processing capacity of up to 7 transactions per second (against a dozen thousand for Visa). However, a block can only be created every 10 minutes. It is therefore necessary that the miners work more and faster. The consequence is then twofold :
- the validation of a transaction takes too much time , which goes against one of the best bitcoin ads, namely its speed,
- transaction processing fees soared by as much as $ 30 in December 2017, making small payments unprofitable and above all useless (fees that have since declined but remain a bit high ) . This also goes against one of the principles of bitcoin, namely a much lower cost or almost free, even if you send your bitcoins to the other side of the world.
The problem is, at the same time, the capacity of a block limited to 1 MB, and the number of validated transactions per second which is too weak to answer the demand.
Solutions set up far from being unanimous
These solutions are mainly the famous forks . I had already talked about it here. The difficulty comes mainly from hard forks . A hard fork occurs when the blockchain splits into two separate books, depending on a fundamental change in the rules governing the software’s protocols. Basically, nodes that are not up to date software can not validate those who have been to follow the new rules of consensus. It’s as if your Windows 10 had not been updated and you could not browse the internet because of it.
The hardest known forks are the creation of Bitcoin Cash (BCH) and Bitcoin Gold (BCG). However, the creation of these cryptocurrencies did nothing to the problem of bitcoin scalability and did not really help to reassure the general public (I will not enter the debate for or against the BCH …). Other proposed developments, which are not forks , have not even seen the light of day. The best known is SegWit2X which was discontinued in November 2017.
Lightning Network for Dummies
Lightning Network has been in use since January 10th and will develop throughout the year 2018. Hopefully this will be as soon as possible. But its use is really at the embryonic stage .
Lightning Network allows certain transactions not to be directly stored on the blockchain . Parallel payment channels would then be created using an off-chain protocol, located next to ( off ) the main blockchain ( on-chain ). Transactions can be processed without delay because they are not validated in the main blockchain. One of the channels of Lightning Network then keeps the record of the transactions without finalizing them and sends on a specific date the final balances of the off- channel channel to the bitcoin blockchain as if it were a single transaction, thus closing the channel.
In other words, if the channel includes 100 transactions, only the balance of the 100 transactions is passed to the blockchain , which drastically reduces the number of transactions that the bitcoin blockchain must process. In the example cited, the number is divided by 100. The sine qua non is that the two protagonists must use Lightning Network … hence an implementation that could be a bit long. Did you understand the system? What are the future benefits?
Why Lightning Network is a revolution?
The great idea is of course not to create a new payment channel for each new transaction. It would be uninteresting … Lightning Network allows payment channels to be linked to each other . New transactions can then be routed through existing payment channels instead of creating a new one for each new transaction. Not only the transactions between two protagonists take place in their payment channel, but also the transactions of other people . Whoever made the first transaction, “owner” of the channel, would bear the transaction costs but these will be much lower than those practiced today. Nevertheless, this point remains to be clarified when putting it into practice .
But what would be the great progress of a widespread adoption of Lightning Network , in addition to a newfound speed and transaction fees that have become as low as in the good old days? Those who follow me have probably guessed … The environment of course ! Since only the final balances of a channel will need to be validated, the mining would only concern this channel and not each transaction. A greatly reduced energy bill and therefore, if the energy used is not green, a strong reduction of the carbon footprint is to be expected .
In summary, that positive and a certain improvement in the image of bitcoin with a general public who looks a little too mainstream media … Never forget that crypto-currencies are intended to become universal and not a toy for cryptophiles!