What is the Lighting Network and how does it work

We are clear that in the current chain of blocks of Bitcoin, each team or node make a store of transactions. Well, lightning network is a protocol that aims to scale and accelerate the blockchains.

If we had to define it and explain it to a person not expert in the matter, these would be its 3 most characteristic points:

Instant payments

It is the possibility to make payments immediately without worrying about confirmation times. You can make secure transactions with smart contracts that do not require the creation of a transaction for each payment.

Scalability

Ability to process millions and even billions of transactions per second through the network at very low costs to be made outside the chain of blocks further strengthening the use of Bitcoin, remember that your current operating limit is 7 transactions per second.

Micropayments

Imagine being able to send 0.10 € to another person / machine in the other part of the planet in gratitude for an original tweet. Initially Bitcoin solved it but little by little, and unfortunately, that capacity is disappearing. If you want to send 20 euro cents, you can pay an extra 100% in commissions to guarantee that your transaction is confirmed by the miners (The block is small, and as it fills quickly, the transactions that leave the miner the highest commission are prioritized). Which completely destroys one of the potential uses that usually characterize Bitcoin?

In fact, these three points are among the most criticized currently in Bitcoin; the impossibility (increasingly patent) of sending small amounts of money due to high costs, its operational limit of 7 transactions per second and having to wait 10 minutes on average to receive a confirmation (important “on average”, since sometimes a transaction may be waiting for hours to have a single confirmation, even, never to be confirmed, this is not good for the Bitcoin expansion).

Well, with Lightning Networks, this would be solved (at least this is defended by its creators).

Let’s see a little more.

How does the lightning network work?

To understand its operation, it is important that we first have an example very clear: the payment channels.

Bitcoin transactions are much cheaper when compared to other traditional payment systems but in certain cases it may be the case that you want to make a shipment as quickly as possible without resorting to the cost of transmitting a transaction, since these must be mined and stored in the thousands of nodes each time they are issued.

 What are the payment channels?

The “payment channels” are the basis of the lightning network. In them, two parties create a multiform transaction in the blockchain with at least one of them sending funds.

” Payment channels allow two users of Bitcoin to transact commitments to pay back and forth between each other much faster and more fluidly than Bitcoin’s 10 minute block times would normally allow. “

Each person has a private key and each future transaction can only be made if the keys of the two parties sign.

The opening time of this channel is about 10 minutes or how long it takes to mine the next block, but once it is open, the participants of this payment channel can exchange assets between them instantly using the funds stored in said channel.

Transactions within the Bitcoin network are valid as long as they are issued to the network and included in one of the mined blocks. In the case of payment channels, all transactions that are executed within a channel are not issued until the participants decide that the channel ceases to operate.

LEAVE A REPLY

Please enter your comment!
Please enter your name here