What even is a Lightning network?
The Bitcoin Lightning network is becoming a number 1 topic in Crypto world. While it's here to help solve many issues that are stopping Bitcoin from moving forward, it's got it's downsides as well. Let's look at the biggest advantages and traits of the Lightning Network.
Let's say you are using Bitcoin to purchase an item from the store. While the transaction is secure and encrypted, the time taken for it will be a lot longer than if you were using other traditional payment methods, such as a credit card.
That brings us to the biggest problem of crypto transactions - the speed. Lightning Network is a decentralized protocol layer added to Bitcoin’s blockchain which allows users to create a payment channel between any two parties on those extra layers. So how does the Lightning Network work?
It uses the smart contract functionality of blockchain to set up temporary micro-payments channels. As a result, two people can establish a payment channel between them and carry out transaction which are faster and cheaper while not writing anything to the main Bitcoin blockchain yet. After the channel closes, it's inputs and outputs are being written to
the Bitcoin mainnet blockchain as one entry. This saves the mainnet's power, and, of course, makes the whole payment process cheaper.
With news of excel plugin enabling bitcoin transactions via lightning network, the feature is gaining more momentum. So let’s go over the following pros and cons of this feature:
Pros of Lightning Network:
As we've mentioned before, the biggest pro of LN is its speed. With this feature, transactions are way faster than what they are on a normal basis for bitcoin.
Tiny payments can be made via LN and no matter how small they are, they will be done instantly. With its increasing support for altcoins, users are making more and more diverese transactions via LN.
This makes it a popular choice for people who are looking to make large transactions regularly without burning a hole in their pocket.
With LN, the transactions are anonymous and encrypted. Only when the payment channels are closed and the balance is paid out to both parties, does the blockchain store any information. This adds an extra layer of security to transactions made on the LN.
Cons of Lightning Network:
One big drawback of the LN is that it does not support payments made offline. Everything is done real-time. This can cause inconvenience to users who might not always have access to the internet.
Lightning Network is not a go to option for large scale payments because it is designed to handle mostly small to medium-sized transactions. Also, if your peer is unresponsive, it will result in your coins being frozen inside the payment channel and you have to wait for hours before you have access to your funds again.
After all, centralization is a major issue with Lightning Network. Some believe that LN might actually encourage centralization in payment hubs, which is quite similar to miner centralization.
Privacy related issues could potentially crop up since these transactions on LN usually take place off the chain. The transactions are not tracked by the main channel.
Conclusion:
While there are many drawbacks on the "Lightning way", it still is a potential solution to couple major problems with Bitcoin blockchain as we know it. If the Bitcoin community remains strong,
many channels will be opened before the traditional, fiat giants enter the market. Hopefully, this article will encourage people to fight centralization, open the channels and keep Bitcoin independent and safe!
