Lightning Network is an overlaying technology in the Bitcoin network, introduced to solve the blockchain scalability problems. Launched in 2018, after several years of development, this network makes it possible to carry out almost instantaneous transactions and at very reduced costs , a crucial point for Bitcoin, often criticized for its slowness and its high fees during periods of high demand. Today, Lightning Network has become a pillar of the growing adoption of Bitcoin in countries like Salvador. Let's see together how this revolutionary technology works.
Table of contents
What is Lightning Network?
Lightning Network is a Layer 2 , that is to say a solution built on the Bitcoin network, which aims to improve the performance of the original blockchain. It makes it possible to decentralize payments outside the blockchain, while taking advantage of its safety. Transactions are carried out using payment channels between users, allowing almost instantaneous transfers at reduced cost.
Why is it necessary?
The Bitcoin network, although extremely secure, is limited in its ability to deal with transactions. Indeed, it can only manage 7 transactions per second , with costs that can quickly increase. Compared, networks like Visa manage up to 65,000 transactions per second . It is here that Lightning is involved, offering a solution capable of managing thousands of microtransactions at less than 1 Satoshi (0.00000001 BTC ), while bypassing the slowness of the main blockchain.
How does Lightning Network work?
The Lightning Network is based on a system of payment channels . Here is a simple example of its operation:
- Two users, Alice and Bob, open a Lightning payment channel by carrying out a transaction on the Bitcoin blockchain.
- Once the channel is open, they can exchange instant transactions and at a lower cost between them.
- When they decide to close the canal, a final transaction, which records the balance of exchanges, is registered on the main blockchain.
Thus, the Bitcoin blockchain is only used at the beginning and at the end of the exchanges, which makes it possible to reduce the number of transactions on the blockchain and therefore to avoid the congestion of the network.
The advantages of Lightning Network
The main advantages of Lightning Network are:
- Speed : transactions are made in a few milliseconds a few seconds, much faster than the 10 minutes of waiting to confirm a conventional Bitcoin transaction.
- Reduced costs : transactions cost on average less than 1 Satoshi, the equivalent of centime fractions, while costs on the Bitcoin blockchain can reach several dollars. The costs of less than 1 Satoshi on Lightning are possible thanks to a concept called the Millisatoshis (MSAT) , which represent fractions of Satoshi. Although Satoshi is the smallest divisible unit on the Bitcoin blockchain (1 BTC = 100 million Satoshis), the Lightning Network allows you to treat even smaller amounts to make microtransactions smaller and accessible.
- Increased confidentiality : Unlike conventional transactions, exchanges on Lightning Network are not immediately visible on public blockchain, offering an additional level of confidentiality.
Its role in the scalability of Bitcoin
Lightning Network is a key solution to improve Bitcoin scalability By preventing each transaction from going through the main blockchain, it can treat a much larger volume of transactions. This not only makes it possible to avoid bottlenecks, but also to reduce costs for users.
In comparison, scalability solutions on Ethereum and Arbitrum also reduce the main network load by moving part of the transactions on additional layers. However, Lightning is specifically designed for fast and inexpensive payments , which distinguishes it from these other solutions.
Cases of use of Lightning Network
Lightning is perfectly suited for microtransactions , whether it is to buy a cup of coffee or make donations online. It is also used online trade , where the speed of payments is a major asset.
One of the use of Lightning is located in Salvador , where the government adopted Bitcoin as a legal currency in 2021. To facilitate Bitcoin payments throughout the country, the government has launched the Chivo portfolio , a mobile application that uses Lightning Network technology to allow rapid and very low cost transactions.
Thanks to Chivo, citizens can make instant payments in local businesses, buy everyday goods or send funds abroad, without having to undergo high costs and long confirmation of traditional transactions on Bitcoin blockchain. This initiative has greatly contributed to democratize the use of Bitcoin in Salvador, while showing the world of Lightning as a quick and scalable payment solution.
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Examples of projects using Lightning Network
Many projects have already adopted Lightning to improve the user experience:
- Strike : This application allows you to send payments around the world using the Lightning Network, drastically reducing transfer costs.
- BTC Pay Server : An open-source platform that allows merchants to accept Bitcoin payments via the lightning network, making transactions faster and more accessible.
Lightning Network and exchange platforms
Certain exchange platforms , such as Kraken and Bitfinex , have joined the Lightning Network to allow their users to deposit and remove funds quickly and at a lower cost. This facilitates adoption for Bitcoin users, in particular those who carry out many transactions.
Lightning Network vs other scalability solutions
Compared to other scalability solutions such as stacks (also a Layer 2 on Bitcoin) and Arbitrum on Ethereum , Lightning is entirely focused on fast and inexpensive , while other solutions are focused on more complex functionality, such as smart smart contract or decentralized applications .
Unlike Stacks , which seeks to bring smart contract to Bitcoin, the Lightning Network remains purely focused on the optimization of payments.
Lightning Network challenges
Although the Lightning Network has many advantages, it faces several challenges:
- Safety : Lightning nodes, which are servers managed by individuals or businesses to process transactions, must remain permanently connected to guarantee the fluidity of payments. They must also maintain a certain liquidity to ensure the availability of the necessary funds for transactions.
- Internal costs : Although transactions on Lightning are inexpensive, users sometimes have to pay fees to the nodes to route payments. However, these costs are much lower than those of transactions on the main blockchain.
Its impact on the adoption of Bitcoin
Thanks to its reduced costs and rapid transactions , Lightning Network plays a key role in the adoption of Bitcoin, in particular for microtransactions and payments of the daily. In countries like Salvador , the use of Lightning Network has made it possible to make Bitcoin payments accessible to all, without the usual obstacles linked to high costs or confirmation periods.
Lightning Network and Defi
Although Lightning is not directly linked to decentralized finance ( DEFI ), it could play a crucial role in the democratization of Bitcoin payments within this ecosystem. By facilitating rapid and inexpensive payments, Lightning could one day be integrated into decentralized financial applications , allowing users to take advantage of the benefits of DEFI while using Bitcoin.
Example of a Lightning transaction: a concrete case
Take a practical example:
- Alice wants to buy coffee for 0.001 BTC . Instead of waiting for 10 minutes for its transaction to be confirmed on the main blockchain, it uses the Lightning Network .
- She sends the funds through a payment channel that she has already opened with her favorite coffee, and the transaction is instantly validated for a negligible cost.
The long -term vision of Lightning Network
In the long term, Lightning Network could become an essential infrastructure for Bitcoin payments, not only for daily transactions, but also for large -scale transfers. While Bitcoin continues to grow, the Lightning Network could play a key role in the transition to a global payment system .
Conclusion
Lightning Network is a crucial advance in Bitcoin's evolution. By offering rapid and economical , it solves scalability problems that slow down the adoption of Bitcoin as a daily payment solution. Whether in countries like Salvador or for online transactions, Lightning Network is a key solution for the future of Bitcoin.
Faq
Is Lightning Network sure?
Yes, Lightning Network uses the safety of Bitcoin blockchain to guarantee the reliability of transactions, while adding protective measures via its payment channels.How can I use Lightning Network?
Just open a compatible portfolio like Strike or Blue Wallet , to create a payment channel, and you are ready to send fast transactions.What are the costs on the Lightning Network?
The costs vary, but they are generally less than 1 Satoshi. There may be additional costs for the use of routing nodes.What is the difference between Lightning and Bitcoin's classic transactions?
Lightning transactions are made outside the main blockchain, making them much faster and less expensive.How does Salvador use Lightning Network?
Salvador adopted Bitcoin as legal currency in 2021, and Lightning Network is used to allow rapid daily payments across the country.
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Noah
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
