If you been in crypto for any length of time, you've probably built up a little library of wallets to handle different crypto coins. Yes, some people stick with just a few top three names like Bitcoin, Ethereum and Ripple, but the reality is we find and get crypto in all forms and we need a holding place for it until we decide what to do next. This fact is particularly true for Discord users where well over 600 different crypto coins and tokens float around regularly. 

Time to Go Layer 2

One of the new aspects of moving Bitcoin, interestingly, is the Lightning Network. Where traditional Bitcoin movement uses its blockchain through BTC addressing and chain transfers, the Lightning Network moves BTC through zaps, essential BTC satoshi movement via a layer 2 approach on the original Bitcoin chain. What's the difference? First off, unlike regular Bitcoin which can have noticeable transfer fees, Lightning allows for micropayments with very small fees. This opens the door for high-frequency satoshi activity that wasn't possible before the layer 2 approach. 

Secondly, the Lightning Network approach is much faster. Where a regular Bitcoin transfer could take as long as 10 minutes, depending on traffic congestion, the Lightning approach takes seconds. It's like the difference between sending ETH and sending NANO. The scalability of transfer frequency is also expected to be extremely flexible, but this will be proven over time with adoption of Lightning by bigger players or high frequency movers of BTC sats.

So What's the Catch?

Unlike your normal Bitcoin wallet, you need a Lightning-compatible wallet to work with BTC on the layer 2 platform. Ideally, using a Lightning wallet that allows receipt and sending of both formats is best. Note, just like regular wallets there are custodial versions and non-custodial versions. Do your own research, but the same rule applies: not your keys, not your wallet. Don't feel bad if that's where you start at first. Custodial wallets like Wallet of Satoshi, for example, are extremely easy to use and geared for beginners. They are just run by a central network manager, so you're at risk if they decide to change up your account. This is not new; Coinbase, for example, is one of the biggest centralized exchanges, and lots of people still use them regardless. It just depends on whom you are willing to trust.

Key Factors to Watch Out For

Lightning, fundamentally, is based on Bitcoin, and that means it is vulnerable to inherent issues. First off, Bitcoin's price fluctuation wreaks havoc, and can be a big factor in transfer temporarily not going through on Lightning as it adjusts to big swings. Second, Lightning takes some getting used to in the technical department for new users. It works different than regular wallet transfer. Additionally, liquidity on the Network can hamper transactions moving through. Bitcoin sats have to move back and forth from the primary chain and the layer 2 level. If there's not enough liquidity at the time at the change point, then it stalls traffic. A user can't control that very much; it depends on where the transaction is in the Network as it moves and when. 

Risks

The aspect of a closed channel remains a risk in the Lightning Network, and it's a result of the open-close design of a transaction. In the Lightning Network a transfer happens when both the sender and receiver open a channel and the transaction is sent. A deposit it put in on both sides to make the channel (ergo the liquidity need noted above). However, if the channel is closed prematurely before the transaction is completed, the sender could end up with more than he or she was supposed to get in that both parties get their deposit back, but the sender also gets his payment back too due to things being incomplete. That can then create havoc when the recipient thinks they got paid. The prevention aspect to this kind of problem comes with nodes. "Watchtower" node function as third party connection points to track and confirm transactions are indeed completed.

Another key factor that helps against too much information leaking from lightning transactions comes in the form of routing. The Lightning Network uses onion routing, making it impossible for nodes to see the entire chain of a transaction. They only see the immediate links for processing. 

Use Cases are Growing

Obviously, high frequency transaction users are going to be the proof cases for the Lightning Network's efficiency and worth. That's already developing in multiple forms with reward system sites, micropayment processers, regular payment processors, retail merchants and similar. Ecommerce and Lightning make a lot of sense on a practical level, but they both need users, support and reliable infrastructure. That only developes on an ongoing basis as there are more users who support the given use case. Major centralized crypto exchanges like Cash App and Xapo are supporting Lightning payments now, and retail/gaming reward platforms like Lolli are jumping in as well. So, the tool is finding root in practical application. Increase usage will dictate the overall success over time.