What is Bitcoin Lightning Network?
The Lightning Network tries to offer a much-needed solution for Bitcoin's Achilles heel: transaction speed and transaction fees, especially during busy times, are making it slow and too expensive. After the soft fork technology upgrade known as Segregated Witness (SegWit), the need for an even better and more efficient solution for Bitcoin's scalability problems was necessary.
Lightning Network, built as a second layer over the original Bitcoin network, enables people to transfer Bitcoin instantly and without fees. Let's do some further analysis and give more insight into its current status.
Making Bitcoin scalable.
During busy times the Bitcoin network struggled with the fact that miners would only go for the transactions with a high enough fee. This pushed up transaction fees and if you were offering a low fee, it could take days for the transaction to be confirmed. This leads to scalability issues, making Bitcoin unfit to buy a cup of coffee, just to give one example.
Lightning Network offers a solution and is fit for micropayments, making your Satoshi a good medium of exchange.
Lightning Network creates a payment channel between two people, who can now transact without the payment ever touching the main Bitcoin blockchain. To ensure trust both users deposit a certain amount of money, called a security deposit. This deposit is sent to a multi-sig Bitcoin address. Miners can process and confirm this layer one transaction. All the smaller payments between the two users will be settled over the lightning network, not touching the Bitcoin blockchain layer one. To streamline the whole process, the Lightning Network allows us to make use of several connected payment channels: your transaction uses the fastest path through other participants within the network.
Solving Lightning Network's security features.
Lightning Network has a anti-fraud mechanism that discourages people who try to cheat with harsh penalties. Since all the transactions on the second layer never touch the Bitcoin blockchain layer, the overall safety of the Bitcoin network is at all-time ensured.
The Phoenix Wallet.
Lightning Network will be a major role in the further development and adoption of Bitcoin. We now understand that Lightning Network is a two-layer scalability solution built on our beloved Bitcoin blockchain, drastically improving transaction speed, cost and offering us new functionalities.
ACINQ (https://phoenix.acinq.co/), a French bitcoin company, know for its Eclair Wallet, now releases its newest Lighting wallet, called the Phoenix Wallet. With the wallet, making transactions on the Lightning Network become as easy as using a simple Bitcoin Wallet.
In the earlier Lightning Network wallets, the user had to understand what he was doing and knowledge of the underlying technology was required. The Phoenix Wallet automatically deals with those problems, so no more opening payment channels by yourself anymore. You don't even have to worry about which network you are using: Bitcoin or Lightning Network.
Phoenix Wallet Features:
Phoenix requires ANdroid 7.0 or higher;
sending LN payments: 10 sats + 0.1% of the amount sent;
On-the-fly channel creation: 0.5% of the amount received. This covers the cost of opening a channel and allocating additional liquidity on our side;
Swap-in (on-chain tx to Phoenix): 0.5% of the amount received. This covers the cost of opening a channel and allocating additional liquidity on our side;
Swap-out (sending from Phoenix to a bitcoin address): variable, depending on the bitcoin mempool usage and our current UTXO set. Note that we're not taking a cut here, everything goes to the miners;
12 words seed.
Lightning Network Developers:
Last year, six different teams were actively developing the Lightning Network:
- Eclair by Acinq;
- Lightning Network Daemon (LND) by Lightning Labs;
- c-lightning by Blockstream;
- ptarmigan by Nayuta;
- Rust-Lightning by Matt Corallo;
- Lit by MIT's Digital Currency Initiative (DCI)
Lightning Network Statistics:
According to txstats, (https://txstats.com/dashboard/db/lightning-network?orgId=1), the Lightning Network is growing steadily and has now 36410 channels with a total of 870.0668 BTC.
This is my first article on Lightning Network, I will learn more about it and offer more content soon. Thanks for reading!