Bitcoin and Its Lightning Network
After the birth of the first cryptocurrency which is Bitcoin, the main problem that it had was the scalability issue. The reason being the small block size of just 1 MB. The new technology came into existence to solve the scalability issue by bringing in the Bitcoin ambit the lightning network. The underlying idea behind this network was to deal with everyday transactions without storing them on the main blockchain. The approach is known as off-chain in terms of its usage. The main help done by this lightning network is that it reduces the load on the main blockchain. You can read more for availing fruitful outcomes in your crypto journey.
On a blockchain only two types of transaction are required,
- The one, where one needs to initiate the payment channel and vice versa.
To unlock the money an exclusively signed balance sheet is required that provides the transaction with utmost protection. The funds can be released easily by both the parties as they have signed the balance sheet copies, if any of the parties do not want to cooperate even then this is possible as they have already signed the balance sheet. Further, to send bitcoins you don’t need a direct payment method, you can simply use the provided network to send coins ahead.
- In a lightning network, your payment is directly transferred from one person to another with the least amount of fees and authorities being involved in between. It further removes the strain on the blockchain but enough amount is needed to run the channel.
FEW PROBLEMS THAT THIS NETWORK HAS FAILED TO DEAL WITH
- The price fluctuations of Bitcoin are still not cured, the reason being its popularity, more people have started trading as a result bringing more volatility to the Bitcoin’s market. Its volatile nature resists the big companies to accept Bitcoin as the viable method of making transactions. For example, if we talk about Tesla that had earlier accepted Bitcoin as a legitimate method of payment, it gave a huge hike to its price but after the fluctuations in its price, it again cancelled Bitcoin as a legitimate method of payment. Hence, we can say that to make Bitcoin a legitimate and accepted method of payment it has a long way to go.
- As per the claims that lightning network would lower down the fees of the transaction seems to be still a problem. As it was claimed that once the transaction would be off from the main blockchain the fee would come down, but its popularity does not seem to be doing so, and still its fee is intimidated by the increased supporters it is gaining every day. The fee associated with it is diverted into two main parts, the charges for opening and closing the channel between the parties to a Bitcoin transaction. Although the record must be kept for any transaction done on the network.
Then there are routing fees which are associated with transferring the payments amongst the channels.
Lastly, the problem of bitcoin remaining online on the lightning network for enabling the receiving and sending of the payments. For such transactions, the parties get their personal keys to initiate and close the transactions. If any transaction stays online for longer then there are chances of the coin getting stolen on the other hand if the transaction is closed for a long time, then the transaction that had taken place may be lapsed due to the inactiveness of the network.
The above-mentioned topic relates to bitcoin’s lightning network, which was invented as a solution to make a transaction in offline mode though not working on the main blockchain. I hope this topic proved beneficial to you as a Bitcoin trader.
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