In today’s tech-driven world, earning money online is simpler than brewing tea in real life. Blockchain technology, being a popular method of digital revenue generation has lured millions of users into the process.
However, there is a price to atone for. The transaction fees are on the rise. The engineers who are involved in Bitcoin and blockchain technology have been trying hard to discover a premium way through which transaction fees could be overpassed or avoided. The answer is Lightning Network
What is Lightning Network
The lightning network offers the resolute to this problem. This is a system that allows people to perform transactions with minimum transaction fees. The fundamental concept of this network is to keep users off the main networking protocol. The Lightning network further enhances the ease of Bitcoin so that it can be used as a day-to-day currency.
Purpose of Lightning Network in Blockchain Technology
The main purpose of the lighting system in Blockchain technology is to let Bitcoin users develop a personal channel of payment amongst the parties that are involved in that particular transaction. These channels and gateways serve as the best payments sent or received with less waiting time. The waiting time is reduced because here the transactions are occurring without the usual wait. The transaction records in the blockchain technology are kept, yet not finalized in the process. A few moments later, a notification is sent to the Bitcoin network in which the network acts as a usual transaction. This notification message consists of details related to the final balances created.
The lightning network was created to reduce the message number that Bitcoin has to process over its block. Within this system, only the urgent messages get transformed into final smaller messages. These are included in the blockchain technology. The messages are in the form of entries in chronological order. A huge number of entries together make up the blockchain technology.
Is it better than Bitcoin?
Lightning networks might provide a good method in which transaction fees are reduced within the main blockchains. The fact is, Bitcoins and several other solutions offer the ease of scalability and hence are still considered more relevant. The Segwit from bitcoin still offers a methodological alteration in the blockchain done by eradicating the signature from the block and then adding to another block. The signature remains the private key and might act as an essential aspect of the transaction. By eradicating the transactions, plenty of space is saved which further results in a greater increase in the speed of the transactions.
The comparison for Blockchain Technology
When comparing Bitcoin to the Lightning Network, Bitcoin might solve the purpose. But it does lack a few assets- speed and accuracy. Also, the scaling issue that emerges every time in Bitcoin is beginning to be reduced now. This way, the Bitcoin price has dropped especially when compared to Bitcoin Cash. This means that the biggest cryptocurrency is making efforts to become more effective. One example is the increase in block size to make it up to 8MB for instant transactions.
Summing it up
Various Bitcoin alternatives are working meticulously on scalable solutions with novel technological solutions. This denotes that the cryptocurrency with a flexibility feather in its cap will determine who leads the market in near future. The lightning network has surely made a dent in the well-made structure of Blockchain technology and Bitcoin. Only the future will tell how things will shape up in this competitive and ever-growing market.
Learn more about the intriguing and captivating topics related to blockchain technology with Investinhub.
Frequently Asked Questions
What is the technology behind blockchain technology?
Blockchain technology is a distributed, decentralized digital ledger that keeps track of transactions between numerous computers connected to a network. There are several transactions in each block of the chain, and each time a new transaction takes place, a record of that transaction is recorded in the ledger of each participant. Distributed Ledger Technology (DLT) is the name for the decentralized database that is supervised by several parties. Nowadays, Blockchain technology is brimming with new technologies, such as artificial intelligence Crypto.
What is the working of Bitcoin?
A cryptocurrency that uses a decentralized blockchain technology network is called Bitcoin. From the user’s point of view, Bitcoin is a computer program or mobile app that lets users send and receive bitcoins and offers a personal wallet. In the background, the Bitcoin network is exchanging a publicly accessible ledger known as the “blockchain” that comprises all of the transactions that have ever been completed, enabling a user’s computer to confirm the legitimacy of each transaction. Digital signatures that match the transmitting addresses safeguard each transaction’s legitimacy.
What is the Lightning Network?
Using micropayment channels, the Lightning Network is a second-layer network constructed on top of the Bitcoin blockchain technology that expands the blockchain’s functionality and facilitates transactions more quickly and affordably. Users can initiate payment channels that remain open until they complete their transactions; upon closing the channel, the transactions are transferred to the primary Bitcoin blockchain technology. This makes transactions easier and more affordable, particularly for small amounts.
What advantages does the Lightning Network offer?
The Lightning Network offers the following main advantages:
- Cheaper and faster transactions that make microtransactions possible
- Increased user privacy by just showing the entire value transfer rather than individual transactions
- Less energy is used than when transactions are carried out directly on the Bitcoin network
- Multi-signature scripts and smart contracts to guarantee safe money transfers
What are the major concerning issues with Lightning Network?
The following are the primary issues with the Lightning Network:
- Possibility of centralization as companies that purchase Lightning nodes turn into hubs, emulating the hub-and-spoke structure of conventional banking
- Closed-channel scam, in which a dishonest user broadcasts an outdated version of the channel in order to make money
- Fees for channel opening and closure in addition to routing fees
- Issues such as payments that become trapped and take days to get validated
- Because of the anonymity that the Lightning Network offers, there is regulatory concern.
