Lightning Network is an implementation to the blockchain technologies, which uses smart contracts and is able to secure safe, fast and cheap transactions of Bitcoin and other cryptocurrencies.
Lightning Network is an implementation to the blockchain technologies, which uses smart contracts and is able to secure safe, fast and cheap transactions of Bitcoin and other cryptocurrencies. It is so-called off-chain solution of network scaling. While the best-known Bitcoin alternative, called Bitcoin Cash, handles the scaling within its own blockchain, the original Bitcoin prefers to take another approach. It uses creating channels, through which transactions are sent, but are not confirmed each separately, but all together when the channel is closed. This scaling solution is interesting because of following reasons:
As has already been mentioned, the payments within the open channel are not dependent on the standard duration of the transaction confirmation. That is because the payments go around blockchain and therefore are not dependent on confirmation of another blocks. The confirmation is made the moment, the channel is closed, but the payments are still immediate. Their realization is in the course of few milliseconds to seconds. It is the reason why it is called “Lightning” transaction.
Scalability is one of the main reasons, why implementation of this technology is so important, mainly for Bitcoin. The Bitcoin site is currently adapted to 7 transactions per second. Lightning Networks is a solution, that enables theoretically up to a billion transactions per second through opening channels. This implementation will then help Bitcoin and other cryptocurrencies to the mass adaptation.
Another pretty substantial circumstance are very low fees for those transactions. User in the site opens a channel, for which he pays the same as he would for the usual transaction in the Satoshi units. In the channel, the transactions are under way the moment the amount to open the channel is reached. The channel is then closed and entered into blockchain as a transaction. The fees for the individual transactions are negligible when compared to the usual transactions. Such low fees make Bitcoin again usable for smaller payments.
Another phase of the Lightning Networks implementation is a technology called Atomic Swaps. It is an exchange of various cryptocurrencies without the use of mediators, such as exchanges and exchange offices. In short - through those channels, it will be possible to exchange Bitcoin for Litecoin. This fact is not as important for Bitcoin, as it is for other cryptocurrencies close to it, such as the mentioned Litecoin. It is actually another possibility of scaling Bitcoin in a way, that it is exchanged to smaller cryptocurrencies. Therefore, Litecoin is going to be able to be used as a kind of silver to the digital gold, which Bitcoin is considered for. Exchange between individual cryptocurrencies using Atomic Swaps is going to be fast, cheap and very practical.