The Lightning Network sparks to life... almost


Developers of the so-called Lightning Network have made significant progress in creating a working model, which brings the new transaction system one step closer to deployment on the Bitcoin blockchain. The implications of the Lightning Network are of critical importance to the scalability of blockchain technology, which has been an increasingly hot topic amidst the hostile takeover of the Ethereum network by crypto kitties and the clogging of the Bitcoin blockchain by hoarding masses of interested investors.

So what is the Lightning Network, how does it work, and why should you care?

The Lightning Network was created by Joseph Poon and Thaddeus Dryja as a solution to the scalability problem of Bitcoin and blockchain technology as a whole. As Bitcoin becomes more and more popular, the number of transactions taking place on the network are going to increase at a rate that will likely render the network essentially unusable in its current form. Transaction fees will become prohibitively high for small exchanges, and the the validation time of single transactions will be grow to parallel that of traditional bank transactions, before surpassing them as the entire Bitcoin network grinds to a clogged up halt. The Lightning Network is a creative and exciting solution to this problem where users are able to create off-chain channels to conduct trades between themselves without having to write each individual transaction to the blockchain. The final balance between the individuals is only written to the blockchain once the external channel is closed and settled, which has the capacity to alleviate a significant amount of traffic from within the network and alleviate the strain on the blockchain structure.

The transactions between parties in the Lightning Network are governed and by an existing smart contract that utilizes the nLockTime function to establish an order of transactions that prohibits double spending and allows for the trust-free exchange of currency. To view a more complete explanation, I recommend checking out this 8 min video.

The Lightning Network is an important development in blockchain technology for all parties in involved. From the user’s point of view, it’s a solution to a major problem that all popular blockchain based platforms will face, including Bitcoin and Ethereum, as the utilization of their network grows. There are a lot of problems that blockchain skeptics like to cite as the inevitable source of demise for this technology. But for every skeptic talking about a problem, there is someone working desperately to come up with a solution; the Lightning Network is one such solution.

From the miner’s point of view, the Lightning Network isn’t such a great thing. Miners benefit hugely from short-term network congestion and rising transaction fees. After all, the more people are willing to pay to have their transactions validated quickly, the more miners stand to gain from their efforts. This is a fair concern on behalf of such a vital part of the blockchain ecosystem, but also somewhat shortsighted. Such a perspective fails to recognize that solutions such as the Lightning Network will only help blockchain technology grow, which, even if not immediately apparent, will ultimate benefit miners in the long term.

The Lightning Network is not yet ready for release, but the progress unveiled this past week paints a hopeful picture for it becoming a reality sooner rather than later.

What do you think about the new way of transacting on the blockchain? Leave a comment below!