Author: @JaenisCrypto



Buzz for the next cryptomarket bull run is growing while prices of altcoins are still strongly following Bitcoin’s movements. The big B was in a downtrend until the latest breakout, and it still has the biggest declining resistance to break in order to end the bear trend. In the meantime, the fundamentals are improving rapidly. Lightning network is about to strike.

One sentence introduction to lightning network: it’s an off-chain scaling solution for Bitcoin that crushes anything seen before in terms of transaction throughput. C u l8r Visa. What’s about to change with lightning network becoming more widely adopted? Several things, and I see them all as bullish. For the moment, mainnet implementation is experimental, but you can safely try sending payments in the lightning network using the testnet.

How does it work tho?

In the lightning network, participants of a transaction need to have a payment channel open to the network, so that they can reach each other via a route in the network. Having a channel open to the network, you can make vast amounts of transactions, but you are dependent on the amount of other payment channel’s capacity. Capacity means how much Bitcoin is deposited into a specific channel. To summarize, this means you can’t send more Bitcoin in lightning network than a sender has available on the payment route. Payment channels can only transfer an amount worth the balance that belongs to the sender in the channel.

It’s funny how the off-chain (lightning network’s) weakness is the strength of the on-chain (regular BTC transaction), as an active Bitcoin community member named Murch pointed out in a thread. Nowadays, BTC transactions are on-chain, and that’s why we are very limited in the amount of transactions that can be made, but, to the contrary, the volume of each transaction doesn’t matter. The bigger, the better, because you pay less % in fees the bigger your transaction. Size will continue to matter. In the future, small transactions will take place in lightning network, whereas large amounts will be transferred on-chain.

But there’s one problem…

Bitcoin has this issue known as “malleability” that needs to be solved before lightning network can get into full action. Malleability means that a bad actor can change a signature that then changes the transaction’s identifier. For a more precise explanation on malleability, see Jimmy Song’s article. Malleability is fixed in SegWit, because signatures are no longer taken into account when the transaction’s fingerprint is calculated. We are seeing a growing adoption rate of SegWit in Bitcoin which is now around 35%. So are we ready?

Get me hyped

The great possibility lies in there being thousands of open channels, which there already are. With so many possible connections between two different nodes across the network, it’s possible to send small payments in BTC and only update the balance sheets between lightning nodes. No on-chain tx’s. No. Nothing. Think about it, if you make your wage in BTC and spend BTC, what else would you need anymore? Just have a wallet in the lightning network. If you then prefer Litecoin instead, you can do an atomic swap. These swaps, also known as “cross-chain swaps”, are possible in the lightning network, and it has also been proven to work between Bitcoin and Litecoin.

Gibs me dat lightning beetcoin

As seen in the visualization, network is up and growing, and you can get your own lightning address or start a lightning node. Zap is a sleek lightning desktop wallet, and is now available. ACINQ released Eclair, a lightning network wallet in early April for Android, but later pulled it out of Google Play because they made a beginner error of losing their app signing key. So they’re coming back soon™.

It’s not too long from now when lightning network will be able to handle micro-payments and smaller transactions across all platforms and devices. As Coindesk reported, we could really see a fully functioning lightning network in mainnet this year. I believe that in the later quarter of this year, micro-payments in lightning occur in such magnitude, that it’s very likely that on-chain transactions will become more expensive. That is because on-chain transactions are priced according to the cost of including them in the block.

The biggest challenge for Bitcoin being used as a payment method seems not to be the technology anymore, but instead the way we treat it as a speculative investment. I’m also swinging a two edged sword here myself, but I do believe that as cool a technology as lightning is, this year it’ll change attitudes and the way we see Bitcoin. What are your expectations for lightning network?

For additional resources see the lightning network homepage.

Simple explanation of lightning network’s basics.