Lightning Network Inception

Bitcoin Lightning Network Roadmap

Bitcoin has earned the reputation of the world’s most widely used and valuable digital currency. It allows anyone to send value without a trusted intermediary or depository. This is all possible using advanced scripting and complex algorithms. Bitcoin aggregates the transactions into blocks spaced ten minutes apart. These transactions or payments are widely regarded as secure on bitcoin after confirmation of six blocks or about one hour. Ever since its existence, Bitcoin has been able to process around 7 transactions per second. This was enough in the beginning; later the system has been congested. Due to this, transactions take a long time to process and transaction fee is going exorbitantly high. Apart from the above limitation, there are other drawbacks also. Bitcoin transaction confirmation takes up to one hour for validations and endorsements. Micropayments (payments less than a few cents) are unviable due to the transaction fee. Lightning Network tries to solve these problems. It is a multi-party smart contract developed using the bitcoin’s built-in scripting. The Lightning Network adds one more layer to bitcoin’s blockchain and enables users to create payment channels between two transacting parties on that extra layer. These channels can exist until they are required. The channel is set up between two people, transactions will be instant and the fees will be almost non-existent or extremely low. Bitcoin Lightning Network Explained The Lightning Network doesn’t need block confirmations for the payments done. They are instant and atomic. The lightning network can be used at retail point-of-sale terminals with the user device to device transactions or anywhere, where instant payments are needed. Crypto funds are placed in two-party crypto multi-signature channel bitcoin addresses. This channel can be thought of representing an entry on the bitcoin public ledger. To spend funds on the channel, both parties agree on the new balance. The latest balance is stored as the most recent transaction signed by both parties spending from the channel address. To make the payments on the channel, both parties sign a new exit transaction spending from the channel address. With this, all old exit transactions are invalidated. It does not require the cooperation from the counterparty to exit the channel. Both parties have the option to unilaterally close the channel, ending the transaction relationship. All parties have multi-signature channels on this network, anyone can send a payment to any other party across this network. By embedding the payment condition on the knowledge of a secure cryptographic hash , payment is done across a network of channels without the need for any party to have unilateral custodial ownership of funds. The Lightning Network enables what was previously not possible with trusted financial systems vulnerable to monopolies—without the need for custodial trust and ownership, participation on the network can be dynamic and open for all. Let me try to explain the above with an example. My two friends Honky and Tonky want to send money to each other frequently. They can set up a channel on the Bitcoin Lightning Network. They start by creating a multi-signature wallet, both of them can access with their respective private keys. They can both deposit bitcoins into that wallet. Now, both of them can perform unlimited transactions amongst themselves. These transactions are redistribution s of the funds stored in the shared wallet. Anyone of them can send BTC to the other, by transferring the right of ownership of that amount to the other. Both of them use their private keys to sign for the up-dation of the balance sheet. The actual distribution of funds will happen when the channel is closed. The algorithm will use the most recent signed balance sheet to determine the ownership of the bitcoins. Once the channel is closed, the information of the initial and final balance is broadcasted to the bitcoin blockchain. In this way, the bitcoin lightning network enables to conduct numerous transactions outside the main blockchain and finally record them as a single one.Lightning Network was first described in a white paper by Joseph Poon and Thaddeus Dryja in 2015. Currently, three startup teams are working collectively on the development of the Lightning Network. These areandThe road ahead is the open new possibilities for micro-payments. The lightning network will enable us to send funds down to 0.00000001 bitcoin without the custodial risk. Presently, the bitcoin blockchain enforces a minimum output size much more than this, with a fixed per-transaction fee. With all this, in the present scenario, micro-payments are almost impractical and impossible. The most exciting thing about the Bitcoin Lightning Roadmap is that if it is widely adopted, there will be no need to set up a dedicated channel to send funds to someone. Instead, I can send payments to someone using channels with people that I am already connected with. The system will automatically find the shortest channel route. Eventually, the bitcoin lightning network will provide an answer to using the bitcoin for micropayments. For buying even a cup of coffee using the bitcoin. I will also like to mention that the recent tests on different blockchain have proven to be interoperable. Lightning Network was designed specifically for Bitcoin, but the technology is now being developed for other cryptocurrencies like Steller, Litecoin, Zcash, Ether and Ripple as well. Another startup ‘‘ is also working on the Lightning Network. They have claimed to get 150 orders in one week on their web-based portal for the American pizza restaurant chain Domino’s. Fold plans to extend its web portal for other shopping areas like Whole Foods, Target, Dunkin Donuts, Uber and Starbucks. Fold plans to facilitate consumer orders through converting their cryptocurrency payments to traditional fiat payments, and pass this payment onto the different stores. In this, Fold’s backend handles the conversion between Bitcoin and fiat currency. Blockstream, one of the companies working on the Lightning Network, has already hired satellite transponders so that bitcoin transactions can work in the remotest of the remote area without any internet. Bitcoin and Cryptocurrencies From Satellite With fast transactions and usage of bitcoin and other cryptos in daily transactions, the line between the crypto and fiat will blur. The big question is can crypto replace fiat in the future? Everything is possible in this fast-changing world of fast-changing technology! Also, check my other posts: Creating Blockchain APPs With Crowd Academy

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