Lightning Network - what is it?

People dealing with or even interesting in cryptocurrencies have heard the name Lightning Network more than once. Some understand exactly how it works, others know that it is supposed to be a breakthrough, but not exactly what it is. Exactly - what is the Lightning Network and how does it work? And is it really a new opening to the world of cryptocurrencies that will allow them to be popularized to the same extent as traditional currencies? We check and translate so that everyone will understand.

The cryptocurrency problem, actually blockchain technologyon which they are based is speed of action. We had the apogee of troubles related to this at the end of 2017, when Bitcoin was at the peak of popularity, the number of transactions reached historic highs, but it also caused a lot of problems that no one was aware of before. The time needed to process many transactions at the same time was the largest and the related fee, which grew by leaps and bounds. It was then that people started thinking about how to solve these problems. For now, there are many indications that this will be allowed by the Lightning Network, a solution that goes beyond blockchain.

Why blockchain has time limits

Blockchain technology has time limitations as there are no shortcuts. Before we add another transaction, i.e. a block, it must be properly "described" and encrypted. This requires complex mathematical and cryptographic operations that, of course, computers do for us. However, they also have time constraints, known as the average block length, i.e. the time needed to create it.

Each transaction contains all the data about it:

• amount,
• transaction time,
• sender and recipient address,
• the amount of the transaction fee.

Theoretically, you can propose a higher commission yourself. Thanks to this, our transaction will appear at the top of the list seen by miners, who earn on confirming them. In short, the most profitable transactions are the fastest. In practice, the vast majority of wallets and each giełda kryptowalut has a tool that automatically calculates the lowest possible fee and places the order in the waiting queue. In the already mentioned December 2017, the waiting time for the confirmation of the transaction was extended to absurd hours or even days!

Lightning Network (LN) will solve the problem?

Lightning Network technology is responsible for reducing the waiting time for transaction confirmation. Its assumption is to "pull" part of the transaction outside the blockchain network. It is about, for example, subsequent orders between two people who thus pay for a service. LN will create a special channel for them to handle the payment. Only after it is closed, transactions will be added to the blockchain. It does not matter to us, as we previously agreed to confirm them immediately and easily outside the main chain. However, for others it is of great importance - transactions do not block the queue. Channels can also target more people.

“A channel can be understood as a lockable box in which two people put the same amount of funds and each of them padlocks the box. The moment of putting funds into a common box is saved on the blockchain in the form of an "opening transaction" - from now on, the channel can be considered working - Mowi Mohit Mamoria, CEO at Authorito Capital, a fund investing in cryptocurrencies.

Formally, the mailbox is closed when both parties decide that they will not make further transactions and want to settle accounts. Then the blockchain is added to the state of ownership after performing any number of transactions. Of course, you can quickly and easily open a new inbox and re-execute any number of transactions at any time. The computing power of the blockchain network will be charged only after it is closed.

The future is Lightning Network

In short, it can be summarized so that Lightning Network changes ownership bitcoin or other cryptocurrencies in a state that can be defined as a right of possession. It's just like money in a bank - we have it in our account, but when we want to physically have it in our hand, we have to use an ATM or go to a bank branch. In the case of LN, we will arrange everything via the Internet. In addition, transactions with trusted persons or entities will be much faster and cheaper for us.