Twitter wants to integrate Bitcoin Lightning Network into its platform. Some people believe Lightning Network is the future but others doubt it.
To integrate Lightning Network, Bitcoin can make transactions faster and cheaper.
Before diving into Lightning Network, let’s see what it actually is.
What is Lightning Network?
It is a Bitcoin layer 2 solution that facilitates transactions off the blockchain.
Blockchain is very slow
What causes blockchain to slow is the verification process that miners carry over through. The process not only needs to process transactions, earn incentives, verify the transaction, and broadcast at the public ledger. When traffic becomes congested, the process is costly and inefficient.
Scalability is important
Bitcoin can transact 7 payments per second compared with 24,000 from Visa, the credit card company. Who will want to use the technology 3,500 times slower than the current system even if it is secured?
How does credit card payment work?
The credit card payment system is a fiat currency layer 2 solution. When you have a credit card to pay your purchase, your money did not directly pay off through the system. What it did is to process the transaction records after a certain period of time for settlement. However, credit card companies will verify both parties’ identification and the purchase agreement on each transaction.
Lightning Network similar to credit card payment process
Lightning Network resembles how a credit card works with only records of transactions until the final settlement of all payments ready to only broadcast one final transaction into the blockchain.
Different from credit card
Within the Lightning Network, all parties will create a channel with multi-signature wallet login and deposit into the account that all parties will start transactions until all parties completed transactions and closed the channel.
Some disadvantages of Lightning Network
There are 3 concerns over the Lightning Network:
There all multiple costs include open and closed channels fees, routing fees, and blockchain process fees.
The concern is that overall fees may be higher than the process through the blockchain.
Since it requires nodes all available online, it increases the possibility of hacking.
As Bitcoin price fluctuates, all transactions settle may lose what they were before.
Spamming in Lightning Network can tank the system too
If hackers spammed the system by sending multiple transactions and increased the network process fees intentionally, the system may become congested and costly.
Despite many concerns over Lightning Network, many companies jump ahead to adopt it because it is definitely a possible solution to choose. However, the security of the system may still need to be tested before fully functioning.
Lightning Network is a possible solution for Bitcoin scalability. However, security is really a concern that will be very costly for the network to be attacked.
Photo by Micah Tindell on Unsplash
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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose cryptocurrencies are mentioned in this article. This information is only for educational