Lots of you have been wondering how bitcoin’s network has been able to scale and gain so much value in such a short period. Well, let’s introduce you to Lighting Network. Lighting Network is the protocol that enables the bitcoin network to increase scalability. Let’s go into the full discussion below.
What is Lighting Network?
Lighting Network is a peer-to-peer network that secures its transactions with Bitcoin. The protocol is a second layer payment model that works on the bitcoin blockchain network. You can conduct a cheap and fast transaction on this network and can be used on other blockchain networks.
However, when you use it on bitcoin, it will broadcast all transactions to every node on your network. The broadcasted transactions must be put on a record that’s settled and mined on blockchain.
How does Lighting Network operate?
Every transaction is written on a payment channel called a mini-ledger. All parties included in the transaction can write their balance on the ledger. Then one party can now write their transaction to the ledger for the payment they will receive by creating an invoice set up a string of digits.
When the transfer is completed on the lighting network, the network will scan the invoice through their wallet and confirm they’ve received a request to make payment from within. Once the transaction completes, the ledger updates automatically to the new balance. This is how it will continue to update until the channel is published on a blockchain network. You can get more information on the Bitcoin Formula Website.
How does Lighting Network Help Bitcoin Scale?
Using Lighting Network to complete a transaction will record the transaction away from the main chain. That means people can hide some transaction from the blockchain. By not recording transaction on a network, the network’s transaction speed will increase.
Lighting Network completes its transaction using bidirectional payment channels. This allows both parties to create ledger entries of transactions but don’t announce them immediately on the blockchain network. The payments go through payment channels which each party holds a certain amount of funds. They now receive payment by routing it to each other using the nodes in an onion router.
You will need Timelock Contracts to direct the transactions through the bidirectional payment channel. You will need smart contracts as they enable both parties to handle their transaction by using a secret password.
The receiver also collects the payment using a secret password which creates a hash known as hashlock.
Benefits of using Lighting Network
Low Transaction Fees
Completing a bitcoin transaction on any app would cost around $17.15 while the fee you will pay on the lighting network is a fraction of a cent. Lighting network lowers the cost of a transaction by moving transaction away from the main chain network.
You can complete a transaction on Lighting Network in a matter of seconds as compared to the blockchain network where a transaction can take ten minutes to several hours to be completed. As the transaction occurs on Lighting Network, you do not need to wait for block confirmation before you send your funds. The transaction happens instantly.
With steady patronage of Lighting Network services, new upgrades will be made to Lighting Network to improve the deficiencies in the system structure.
Lighting Network could be the answer to scaling bitcoin to a height it hasn’t attained before. With this secret in the open, don’t be surprised when you see more crypto services implementing this action to scale their service and improve their transaction time while reducing transaction fees.