You might have heard of the Lightning Network (LN) and wondered what it was, and how it works. In short, it’s sidechains for bitcoin. These are kind of sub-blockchains, secured on the main chain, which enable very fast and high-volume payments. Bitcoin can only support so many transactions per second; LN is the solution to that. What goes on in a sidechain is a black box as far as other users are concerned, but periodically a transaction is posted on the bitcoin blockchain to make sure everything’s honest.

What does it look like in practice? Here’s how Vaultoro, a gold-for-bitcoin trading platform, are using it. As they write:

- Download the Eclair Lightning Wallet on Android. - Send some bitcoin to it and open up a channel by putting some bitcoin into the network with any other connected node using auto-connect. - Once you have a payment channel loaded, log into your Vaultoro account, click deposit and select Lightning Payment. - Enter an amount you would like to send and Vaultoro’s system generates a QR code. - Scan with Eclair and boom! Instant, free payment and ready to trade.

Joshua Scigala, Vaultoro’s founder, explains: ‘This first implementation will allow Vaultoro’s users to send Bitcoins instantly, cheaply and privately. Our next goal is to enable people to take orders from the order book directly from their controlled wallet. Vaultoro traders will be able to deposit funds in milliseconds without having to trust our exchange hot wallet if set to instant order. Our goal at Vaultoro has always been to make the exchange radically transparent and now with Lightning Network, market takers will have no need to trust our hot wallet.’

All of which means a whole new set of applications for BTC is now possible.

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