What is the Lightning Network for Bitcoin?

What is the Lightning Network for Bitcoin?

What is and how does Bitcoin’s Lightning Network work? A simple guide to the second layer of the cipher queen, created for Improving the scalability of transactions on the Blockchain.

Bitcoin’s Lightning Network: What is it and how does Layer 2 work?

Lightning Network for Bitcoin Created for a purpose Improving the scalability of Blockchain transactionsbecoming the second most accepted layer by the crypto community.

In fact, Blockchain scalability has been a major obstacle to cryptocurrency adoption from the very beginning. This is why the second layer has become the solution.

The Lighting Network intervenes by handling transactions outside of the Layer 1 Blockchain mainnet, while still taking advantage of the main network’s robust decentralized security model.

In practice Enable off-chain transactionswhich means transactions between parties that are not part of the blockchain network, Create multiple payment channels between parties or BTC usersthus forming the second layer.

By exiting the official chain, The Lightning Network can scale Bitcoin transactions per second (or TPS), charging lower feesand enabling new use cases such as micropayments. Not only that, the second layer too Reduce energy costs Associated with the Bitcoin blockchain.

Bitcoin’s Lightning Network: The Layer 2 Story

Thaddeus Driga and Joseph Boone They were the first developers to propose “The Bitcoin Lightning Network”, In 2015, it was inspired by the descriptions of payment channels provided by Satoshi Nakamoto (the creator of Bitcoin himself) that was published in 2013.

In the paper, Dryja and Poon explain, in addition to describing an off-chain protocol for instant BTC payments, how Layer 2 was able to increase Bitcoin’s TPS, taking as an example the 47,000 TPS peak that Visa reached in 2013.

In this regard, in fact, the Lightning Network’s off-chain payment channels were created to solve Bitcoin’s lack of scalability, as the channels allow many small transactions without congesting the network.

Not only that, Dryja, Poon, and other collaborators founded Lightning Labs in 2016, a company completely dedicated to developing the Lightning Network. After the Bitcoin Soft fork based on SegWit in 2017, pre-launch tests confirmed the possibility of creating applications on the Lightning Network, such as wallets and gambling platforms.

In 2018, Lightning Labs finally launched a beta version of the Lightning Network application in the Bitcoin mainnet, with the participation of public figures. In fact, the former CEO of Twitter Jack Dorsey included The Lightning Network of Bitcoin as a tipping payment on the social network in 2021.

Peer-to-peer payment channel on the Lightning Network

The Lightning Network (LN) protocol allows users Create a peer-to-peer payment channel between two parties. This channel allows sending an unlimited number of transactions, even small amounts, instantly and inexpensively.

Open LN The channel requires the party to make the transaction to Block a certain amount of BTC in the network. Only then will it be possible to measure the quantities whenever a transaction is made to the counterparty. Within the channel, the parties can interact with each other.

Each channel is registered on the main Bitcoin blockchainWhile In-chain transactions can take place off-chain, and validated by Lightning Network nodesand thus was recorded in the LN ledger, thus without informing the main blockchain.

The parties that open the LN channel create a file A smart contract that contains codified agreement rulesthat cannot be broken. A smart contract ensures automatic fulfillment of pre-defined requirements already accepted by the parties.

Bitcoin LN Capacity: Breaking the Record 5000 BTC

The capacity of the Bitcoin Lightning Network is the number of BTC locked into the network. To be clear, this is the BTC used by parties that open peer-to-peer payment channels.

At the time of writing, Bitcoin’s Lightning Network is has broken his new record, Raising capacity above 5000 BTCequivalent to about 99,000 US dollars.

http://1ML.com Notes: 17,865 nodes, 86,448 channels, 5,017,747 BTC capacity ($97,994,688), average node capacity: 0.005 BTC ($97.65). The last 24 hours:

+1 contract +5 channel +0.260 BTC ($5,083).”

This is another 200 BTC locked into the Lightning Network compared to Last month 4800higher than 4500 BTC 2 months ago.

This means that LN usage trend continues to increaseand that BTC can be used within the second layer, allowing for faster and cheaper transactions.

#Lightning #Network #Bitcoin

Leave a Comment

Your email address will not be published. Required fields are marked *