Bitcoin's Lightning Network to Speed Up Cryptocurrency Ledger: What to Know
A way to decongest the bitcoin blockchain.
Scalability is an issue that has bedeviled the bitcoin blockchain since the cryptocurrency exploded into the mainstream. This means that there is such a massive number of bitcoin transactions happening at the same time, that they can’t all be written onto the blockchain in a timely fashion. This results in slower transaction times and higher fees.
California-based startup Lightning Labs has just launched a beta version of its Lightning Network software, known as LND. This transaction protocol that is now on the bitcoin mainnet eliminates the need to write every single microstransaction onto the blockchain. This has the potential to greatly decrease transaction times and lower the cost of fees, a crucial upgrade if bitcoin wants to see an increase of use in the future.
“It’s something the entire community has been focused on and working towards for the better part of two years now,” Ben Davenport, the CTO of blockchain security company BitGo, told CoinDesk. It’s really the culmination of a lot of work by many people, not just Lightning Labs. … We see it as a very important piece of the scaling solution for bitcoin, and perhaps other digital currencies as well.”
This beta version of LND is intended for developers of future similar applications, but is still available to the public if you’re itching to try it. Lightning Labs warns to only experiment with small amounts of money you would be okay with losing. This is software is still a work in progress and can be subject to bugs. In the worlds of John Oliver, “#craefulgang #craefulgang #craefulgang.”
How Lightning Network Works
Every time a bitcoin transaction is made, it’s queued up to be added onto the blockchain. Think of transactions as cars on a highway: The less traffic there is, the easier your payment can zip right into the ledger. However, the bitcoin blockchain can only handle a certain number of transactions per second. Once that number is exceeded, traffic begins to pile up and it might take an hour for your money to go through.
LND will take a lot of small cars, or transactions, off of the main highway to clear up the road for larger payments.
Instead of having to write every tiny payment made on the blockchain, LND allows parties to open a payment channel between themselves. The parties can then deposit their bitcoin into a virtual safe, known as a multi-signature address, which only they have access to. Once that happens, every person involved receives a payment sheet that details how the digital currency in the safe will be distributed.
The money remains in this safe until the parties involved choose to close the payment channel. Once the channel is closed and all of the payment sheets are verified, a final draft of the transactions is stored on the blockchain.
This enables people to make multiple small transactions while only having to write one on the blockchain. This would greatly decrease the amount of cars on the bitcoin blockchain highway.
If this beta version proves to work without any hiccups, it could pave the way for larger scale implementation of LND. This would lead to faster transactions times and lower fees for everyone using the cryptocurrency.