What is a Lightning Network for Bitcoin?

Bitcoin Lightning Network

The Bitcoin network was created in such a way that it can process seven transactions per second. Protocols do not provide an increase in the number of operations per unit of time or scalability. Ten years after the first cryptocurrency started, bandwidth became insufficient. Due to the massive influx of consumers, the circuit confirms proceedings slowly. At peak moments, commissions for users increase significantly.

To contest with modern payment systems (for example, Visa or MasterCard), Bitcoin must accelerate to at least 24,000 payments per second. At the same time, the Visa superior limit capability is at the level of 50,000 swaps.

Nowadays, the Bitcoin Lightning network is being considered. The goal of the project is to accelerate deals between Bitcoin users without compromising security. The organizers also emphasize even greater decentralization than in the cryptocurrency circuit.

What is the Bitcoin Lightning Network?

The Lightning Network is a second-level add-on. The creators of the project proposed to not take into account each transaction in the distributed Blockchain network. Instead, the scheme creates another layer in which communication accesses betwixt B2B users function. This means:

  • There may be any number of passageways, and they obtain for as long as the participants in the operation need.

  • Proceedings are speedy.

  • Fees will be minimal or eliminated.

The Lightning add-in is a system on top of the Bitcoin network that proceeds concurrently. A circuit of junctions works up transactions and QR codes in lieu of cryptographic keys to confirm purchases.

How does Bitcoin Lightning work?

The purpose of the framework is to create fast, secure communication channels between Bitcoin users. This method is most beneficial for those who often make transactions since commission payments are minimal. To start applying Lightning, a person should form a multi-signature wallet for cryptocurrency. There must be coins on the account, and access occurs after the introduction of private keys.

When the channel is open, we can assume that both accounts and all funds on them are in one everyday wallet. After sending the tokens, private keys are used to sign the balance. The algorithm takes into account the last transaction in the distribution of funds. If no more operations are planned, the channel can be deleted.

After the channel is closed, information is given about:

  1. The initial balance.

  2. The final state of both accounts.

If there were many deals, they are not displayed on the Blockchain. Thus, the add-in saves users time by conducting only one transaction, based on the result.

Another peculiarity of the Lightning network is the ability to transmit funds directly to the recipient through a chain of created channels. It is not necessary to set up a direct link as the deal is automatically sent via the shortest path.

It is assumed that the add-in is applied to make small purchases, as these transactions do not have decentralized protection and are not checked by other members of the Bitcoin community until completion. The possibility of operations with different cryptocurrencies without the standard exchange procedure on exchanges with payment of commissions is also tested.

How to use the Lightning Network?

To connect to the network, you need a node or a multi-signature (multi-signature) wallet. A few simple options work with smartphones:

  1. Bitcoin Lightning Wallet on Android. Installing a mobile application forgoes the need to create a complete node and deal with its configuration and maintenance. It forms a mini-client server on the phone and it is easy to transmit money to other participants using the application. At the same time, the user does not own their tokens, since the application developer has private keys for the wallet. Such operations may be analogous to a Uber ride without the right to own a car.

  2. Blue Wallet on iOS and Android. This service is custodial, that is, launching a node instead of and on behalf of the client. Thus, you can accept and send payments, but you can't withdraw coins from your account.

There are several applications built into the surface layer that perform only one operation. For example, through Bitrefill, you can pay telephone bills, and apply ZigZag to exchange cryptocurrencies.

For technically advanced users, there are more sophisticated ways, but with a large number of available functions:

  1. Casa Node. To work with the service, a person should become a part of the Bitcoin and Lightning networks. By launching Casa on the computer, the user receives full control and responsibility for their finances. But only you make your transactions.

  2. Eclair node. This option is for conducting personal transactions but also for routing other people's shipments. But you cannot charge a fee for processing deals. Buyers may also create channels or set off coins to the existing shortest path.

Lightning Joule is the next step after setting up a personal site. Joule is a browser extension. It facilitates the interaction of lightning-fast network controls with popular web browsers: Chrome, Firefox, Opera, and Brave. Micropayments can be made automatically, then only with the use of the WebLN library.

When will the Lightning Network be implemented?

The first descriptions of the chain were issued in 2015. Three primary crews have joined the project with the support of the Bitcoin community enthusiasts:

  1. Blockstream;

  2. ACINQ;

  3. Lightning Labs.

Network protocols are written in varied coding languages but are compatible with each other. The Lightning protocol was conceived to work with Bitcoin, but now Litecoin, Ether, Zcash, Ripple, and Stellar can be consolidated with the protocol.

The network acts in a test version. Sometimes protocol interaction errors occur, so coins are sent, but do not reach the addressee. The developers offer users to try a test network with virtual currencies before submitting real tokens.

Before the protocols are finally approved, they must prove their safety. Therefore, before the implementation of the Lightning add-in, another year or two can pass.

Lightning Network Coins

The network add-in is used for small transactions that are significantly less than 1 BTC. Therefore, payments are made in Satoshi units. 1 BTC = 100 million Satoshi. Such fine crushing simplifies daily household purchases.

How fast is Bitcoin Lightning?

In the testing period, operations are treated almost instantly. When the frame begins to operate in full force, it will compete with all of today’s payment systems. The scalability of the project will allow sending simultaneously at least one million payments per second. At the same time, it does not matter in which cryptocurrency a transaction is made.

Can I make money running a Lightning Node?

The add-in allows you to not only make transactions with lightning speed and low cost but also to earn in several ways:

  • Creation and support of a site for forming channels between other users. For processing payments, site operators can set any fees at their discretion.

  • An account on the Tippin.Me service is an opportunity to advise newcomers on interaction issues in the Lightning Network. For this, they pay a small tip.

  • On the Y'Alls platform, you can post materials about lightning-fast transfers and receive rewards for this.

  • There are several applications, like the Microlancer, where, by performing small tasks, users earn Satoshi.

  • Light Tube – an analogue of YouTube, on which bloggers also receive payment in Satoshi.

  • Bitcoin4Photos is a platform that buys photos with payment in BTC.

Conclusion

The Lightning network seems like a good option for those who regularly use BTC tokens to pay for small purchases. Beginners should be aware that there is a disjunctive method of quick and secure payments – Bitcoin Cash. It is difficult to say which of the two networks will be more prevalent in the future. For those who consider crypto as a long-term enclosure, it is easier to stay away from the "lightning-fast" service. For the daily enjoyment of Bitcoins as a means of payment, Lightning is ideally suited. In addition to speed and low fees (or lack thereof in the future), the network provides participants with increased anonymity and the ability to send micro amounts.


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