Part of the reason why cryptocurrencies are so appealing to many is that a transaction executed through the blockchain can reach its intended destination without requiring third-party confirmation or bumping into any other kinds of obstacles, even if the recipient is located on the other side of the world.
Unfortunately, problems can arise during peak load times. When the network gets congested, transactions may not have optimal completion times. To address the issue, the sharp minds behind the Lightning Network project have come up with a solution.
We’ll give you an overview of the crypto project below.
Introducing the Lightning Network
The Lightning Network has been in development since 2016, created by Joseph Poon and Thaddeus Dryja. The focus remains on optimizing Bitcoin’s transaction speeds, one of the very first and still most popular cryptocurrencies around.
What is cryptocurrency? In essence, it’s a digital currency meant to act as an alternative form of payment and a storage of wealth. Being one of the oldest ones around, Bitcoin is a popular choice. However, as popular as it may be, its blockchain wasn’t properly optimized to handle a large number of transactions, which the Lightning Network aims to address.
The 3 ways that the Lightning Networks improves upon a proven concept
The Lightning Network is not just another cryptocurrency designed to compete with Bitcoin. Instead, it focuses on making it better in 3 key aspects:
– Making Bitcoin transactions energy-efficient. As things stand right now, maintaining the Bitcoin blockchain network consumes a lot of energy due to complex computing that’s going on in the background all the time.
– Speeding up Bitcoin transactions. The issue with the current state of its transactions is that the system wasn’t designed to perform optimally to begin with, which leads to delays in confirming transactions.
– Introducing smart contracts. A major drawback to Bitcoin is that, unlike Ethereum, it doesn’t support smart contracts, at least not by default.
The Lightning Network does away with the need to depend on the main network to process transactions.
The Lightning Network is the solution to Bitcoin’s suboptimal transaction speeds and other inefficiencies.
What are the main potential concerns regarding this solution?
One of the main reasons why cryptocurrencies are held in such high regard is that they don’t rely on centralized financial institutions for someone to perform a transaction.
For instance, if you were to wire thousands of dollars to a friend who resides on another continent, the bank could freeze the transaction and start asking some questions. Such a scenario can never occur with Bitcoin, because there is no third-party financial institution to confirm a transaction.
Some people are concerned that Lightning Network could theoretically introduce some of the elements that come with such centralized systems. At the same time, keeping things decentralized is the philosophy of its creators, it’s simply a question of how to execute things while remaining faithful to it.
Another concern is what’s otherwise known as closed channel fraud. If a transaction were to occur between two interested parties and one of them would fraudulently close the channel after receiving the goods, technically, they could get away with it without having to pay. Therefore, the Lightning Network requires watchtowers to prevent such abuse from taking place.
Last but not least, just like any other financial transaction channel, the network could be vulnerable to hacks. Before it reaches mainstream adoption, the Lightning Network will need to convince its users and investors that appropriate measures have been implemented to prevent cyber crime and fraud.
Conclusion
The Lightning Network is a solution to numerous issues that are plaguing Bitcoin in its current shape and form. It addresses 3 of its key drawbacks, namely transaction speeds, power consumption inefficiencies, and the lack of support for smart contracts. Despite the potential concerns, this makes it a worthwhile investment to consider.
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