All you need to know about Lightning Network – Part One

All you need to know about Lightning Network – Part One

By Farshadhn | Basic Knowledge | 22 Jul 2021


So far, much has been said about the benefits and applications of blockchain. But since there is nothing perfect, blockchain is no exception and has fundamental limitations that limit its functions.

Limitations are as below:

  • Using blockchain for transactions can be expensive. Due to the large number of transactions taking place in the blockchain, the network is overcrowded, and users must pay higher fees to confirm their transactions.
  • It is relatively slow. In the case of Bitcoin, each transaction takes an average of 10 minutes to be validated. This limitation is also called the "scalability problem". In simple words, the scalability problem refers to the small number of transactions in Bitcoin as a payment system compared to other centralized systems. Centralized payment systems such as Visa have an average capacity of 47,000 transactions per second, compared to only 7 transactions per second for Bitcoin.
  • Information about each transaction in a blockchain is given to all participants in the network. which could be frustrating for some users that other network users be aware of their financial transactions.

 

The proposed solution to overcome these limitations is the Lightning network.

Lightning network is a network that runs in the second layer of blockchain and has been introduced with the aim of removing payment restrictions in the blockchain. The Lightning Network can run on any blockchains as well, but most developers have focused on Bitcoin because it is the most well-known currency in cryptocurrencies.

The lightning network provides the following features for its users:

  • Instant transactions in the blockchain: Because transactions in the Lightning network are done off-chain and there is no need to wait 10 minutes to confirm the transaction. So, if you are going to buy a cup of coffee, payment will happen immediately. And in this way, the problem of scalability in Bitcoin is largely solved. Off-chain transactions are transactions that move the asset out of the blockchain and it is against on-chain transactions. In this model of transactions, there is no need for a general agreement to confirm a transaction, and not even all members are aware of the transactions that are performed, and these transactions are not even recorded in the blockchain. and the transfer of assets was done through payment channels has been created between the payer and the recipient.
  • Possibility of micropayments: Because these payments took place in the second layer of the blockchain, there was no need to pay transaction fees, and low-cost payments (up to 0.00000000 BTC) could be made, which is not possible in the main bitcoin network.
  • Privacy: Unlike the main chain, the Lightning network gives you financial privacy. So that, not all blockchain members will be informed of your transactions.

 

But how are transactions done on the Lightning network?

This is a topic we will mention in the next post!

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