An Essay On The Issue Of Bitcoin's Scalability And The Lightning Network


An Essay On The Issue Of Bitcoin's Scalability And The Lightning Network

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As it becomes clearer with each passing day, Bitcoin is going to play a major part in the economy of the future. The advantages of Bitcoin over fiat currencies are so numerous that they can't be mentioned in their entirety in this short essay but it is clear that those advantages are being recognized more than ever recently. Everyday large numbers of new people discover Bitcoin and learn about its potential as a new and better form of money. As more and more people realize that many of the financial problems facing the world are easily avoidable through Bitcoin adoption more and more Bitcoin nodes go online securing its network and making it even more desirable to new investors. However, with all its attractiveness and features that make it appealing as a new type of money, Bitcoin has some small problems that can make its adoption as the most used currency in the world difficult to actualize. One of these problems that Bitcoin's critics are eager to point to is the issue of scalability. Fiat currencies, being controlled by centralized entities, have a big potential to be easily scalable. Transactions can be easily confirmed by a single bank without the need for them to be broadcast to thousands of nodes around the world, as is the case with Bitcoin.

 


While fiat currencies can, indeed, facilitate much faster and cheaper transactions than Bitcoin this convenience comes with a huge trade-off. Fiat currencies work in a trust system where everyone has to trust a central entity to facilitate all transactions. Bitcoin is a trustless network of many individual nodes that can communicate with each other. The problem that arises is that the need for every single Bitcoin transaction to be broadcast to the whole network means that transaction fees increase and transactions take a lot of time. In order to address this problem some developers suggested that Bitcoin's block size should be increased. They argued that larger blocks could hold more transactions therefore they would cause Bitcoin transaction fees to lessen. Serious disagreements ensued between the Bitcoin community about the path forward. Many people were worried that larger blocks would change the way the Bitcoin network would function. Eventually these disagreements culminated in a few hard forks whereby new cryptocurrencies were created including Bitcoin Cash. However, the Bitcoin Network needed a solution to its scalability other than changing its block size. It was obvious to many that Bitcoin's layer one architecture was too indefectible to need to be changed so drastically as some people would argue was necessary. Therefore, layer two solutions were what everyone was looking for.

 

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Bitcoin Lightning Network is one of the most prominent layer two solutions to the scalability problem of Bitcoin. With Lightning Network Bitcoin users can make unlimited instant transactions almost for free. The transaction fees in the Lightning Network are incredibly cheap. As I mentioned earlier, the Lightning Network is a layer two network but what exactly does that mean? All normal Bitcoin transactions are broadcast to the whole Bitcoin network for confirmation and inclusion into the public ledger that is the Bitcoin's Blockchain. In the Lightning Network, on the other hand, transactions are not broadcast to the whole network. Instead, Lightning Nodes create Lightning Channels that can bundle many transactions in a single transaction that will be broadcast to the Bitcoin Blockchain once both nodes of a channel decide to close the channel. (The whole process is a little more complicated than that but that description seems to be enough for this short essay.) What that means is that for every lightning channel there are roughly only two transactions that the Bitcoin network has to handle: one when the channel is opened and the other one when it is closed.

 


It is relatively easy to participate in the Lightning Network if you know how to do it. All you have to do is set up a full Lightning Node and connect it to other nodes in the network. If you want to have the full experience of the Lighting Network you would have to have some Satoshis in your wallet to open a channel with other nodes. Once you do it you can enjoy fast and cheap Bitcoin transactions. However, if you don't want to set up a full node you can still use the Lighting Network using such lightning wallets as Wallet of Satoshi, which is really easy to use. However, you should keep in mind that these wallets are not as secure as a full node that you run yourself because they are run by the companies that operate the wallets and they have the private keys to all the Satoshis that you might be keeping in your wallet. That having been said, if someone keeps very small amounts of Satoshis in the said wallets they can be a reasonably convenient way for them to make small payments.

 

 

Conclusion

Bitcoin's scalability has been the subject of many heated arguments over the years. While some believed that Bitcoin's slow way of processing transactions would doom it to failure, layer two solutions have proved to be the answer that many people were looking for. The Lightning Network solves most of the problems associated with Bitcoin's scalability in a really seamless way. While the Lightning Network hasn't seen the wide adoption that it arguably deserves, its potential is hard to deny. The future is looking bright for the Lightning Network and, as a result of its ingenuity, Bitcoin.

 

Disclaimer

This article was written for entertainment purposes only. I am not a financial advisor and don't advise on financial decisions. Every decision that you make has consequences that you have to take responsibility for. Research deeply before making any financial decisions to assess the risks and benefits of any investing opportunities.

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Weslysosnyder
Weslysosnyder

I am a creative person who can write interesting articles about cryptocurrencies and other things. This is the link to the avatar image: <a href="https://www.flaticon.com/free-icons/man" title="man icons">Man icons created by Freepik - Flaticon</a>


CryptoInsightsByMeForYou
CryptoInsightsByMeForYou

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