Overview

11/09/18 11:25 UTC-4

Lightning network and new opportunities

New opportunities of Lightning Network
New opportunities of Lightning Network

The creators and users of Bitcoin were in search of solutions to current problems caused by the rapidly growing interest and demand for electronic coins. August 2017 was a significant month for Bitcoin -SegWit was implemented.

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SegWit is a protocol that allows to expand the Bitcoin network, but today such changes are not accepted by all and have no impact.

Now the main place is occupied by Lightning Network. Some even say that this technology will be a turning point and will provide fresh assets to Bitcoin. The development of this technology started in 2016, and from the beginning of 2018 its sudden rapid development became noticeable.

 

Work principles

This technology improves the process of transaction verification. But that's paradoxical: the blockchain system should increase the volume of transactions, which, in turn, slow down the network and because of this, we cut the beat.

This is a kind of a register of several blocks, on each of which there are several transactions. The page is added to the register after each complete transaction. Before adding a page to the register, data is processed. It may take up to one hour for a single transaction to be confirmed. However, the Lightning Network significantly accelerates this process, allowing the rapid implementation of transfers of cryptocurrencies, without taking into account the commission and without using the main network outside of the blockchain. That is, all transactions on exchanges, in the form of purchases and sales, occur outside of the blockchain, but the withdrawal from the stock exchange is already within the limits of the blockchain.

Several users can create a payment channel and each of them blocks a certain amount of money in the blockchain, which can be spent only when users confirm the payment. For the transaction to be completely transparent, the creation of this channel is carried out on the main blockchain. In the Lightning Network, transfer of money between participants is carried out confidentially.

After the channel expires, the costs of each user are recalculated by the Lightning Network algorithm, and the unspent amount is returned to each participant. If one of the users leaves the channel, the unspent amount also returns to him. The very closure of this channel is carried out by the payee or payer, by registering the last balance in the blockchain, agreed upon by both parties.

As a result, the Lightning Network, with just two transactions - opening and closing the payment channel, significantly reduces the burden on the main blockchain. Everything is very reliable - in order to unlock the funds, only the last signed balance will be required, a copy of which is available to both users. Everyone can at any time release the funds, even if one of the parties does not have the desire to continue cooperation. Also, you do not need to open a direct payment channel between each user each time you transfer money. For this it is enough to use the network.

Aurélien Menant, CEO and founder of Cryptocurrency Exchange Gatecoin, described the network as "an innovation that changes the game." He also noted that he "uses intelligent contract technologies that allow for instant micropayments using electronic coins such as Bitcoin."

 

Main Features of Lightning Network

First, this is the possibility of instant payments, the speed of which is measured in milliseconds. This opportunity significantly exceeds the capabilities of other payment systems and will allow for instant payments at sales outlets.

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Also, the network allows you to simultaneously conduct an infinite number of transactions. They are implemented with minimal commissions, which, in turn, contribute to instant micropayments. This network is practically safe to use and, as mentioned earlier, more confidential than standard Bitcoin transactions.

 


It is expected that the Lightning Network will help ensure that Bitcoin becomes competitive with other instant payment platforms and soon even displace forks, such as Bitcoin Cash. So, soon, we will be able to pay for all our purchases with the help of electronic money, which, according to forecasts, will become very widespread.

Editor: Yuliya Soroka

#LightningNetwork #Bitcoin #cryptocurrevcy #blockchain

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