Today, I am going to discuss about Lightning Network. What is Lightning Network, Why Lightning Network exist, how it works and why we need Lightning Network. I will try to cover all these topics here. Lightning network is bit complicated. I recommend to read following post before you read this.
Blockchain: Simple explanation
A short description of Cryptocurrency
Now a days, you hardly find any person who does not know about bitcoin. Yes, Bitcoin is revolution invented by Satoshi Nakamoto Why Bitcoin became popular because it is:
That’s why Bitcoin is the future of our financial system. But the main problem is scalability. Bitcoin network can handle only seven transaction per second and the blocksize is only 1BM. Transaction is slow and expensive. To solve this problem new technology emerged which is called Lightning network proposed by Joseph Poon and Thaddeus Dryja.
The Lightning Network is a "second layer" payment protocol that operates on top of a blockchain. It theoretically enables fast transactions between participating nodes and has been touted as a solution to the bitcoin scalability problem
------------Wikipedia
Features of Lingtning Network:
Lightning Network Summary
Lightning Network Paper by Joseph Poon and Thaddeus Dryja
How Lightning network works?
Sourse
If you want send payment to your friend, you have to open a payment channel with your friend. It is refer to opening transaction in main blockchain.
Now you both can fund your payment channel using multi-singnature bitcoin address. It act like a lock. It can be unlocked only both parties agree to unlock. Than one can release payment.
Now you can exchange payment with certain condition agreed by both parties.
Finally this channel can be closed at the of the agreement. Bitcoin blockchain records only two transaction opening and closing, no matter how many transaction took place between these.
As detailed by Elizabeth Stark,
Lightning Network is based on a technology called payment channels. A two-party payment channel is created when both parties create a 2-out-of-2 multi signature transaction on the blockchain, with at least one party committing funds to the 2-of-2 ledger entry. Each person has one private key, and transactions spending from the ledger entry can now be made only if both keys sign. This initial transaction to open a channel takes 10 minutes (or whatever the normal block time is), but afterward the participants can transact with each other instantly using the funds allocated in the the channel. These instantaneous transactions are made by passing signed transactions back and >forth, spending from the 2-of-2 ledger entry.”
As per Lightning Lab Tweet: Lightning Network goes live on 15 March 2018.
Some downsides of the Lightning Network:
