If you've been in the cryptos for a while, then you've probably also heard the name "Lightning Network". Well, many of us know, that it's something connected to Bitcoin and is supposed to make things better, but who has the time or the interest to dig deep to really understand it? So let's try to explain it in the most layman terms ever. If you're already bored, scroll down to the paragraph about main idea.
You have probably sent Bitcoin over the blockchain as payment for services or as a means to convert your Steem to fiat money. For example, one of the easiest ways to get your hands on your hard-earned Steem, was to send it to Bitwala Bitcoin wallet via Blocktrades and order a prepaid bank card from them and topping that up with your Bitcoins.
Now, Blocktrades makes that easy for us - they estimate the optimal fee so that the transaction would go through as quickly as possible. But what if you are using a service that doesn't do that for you?
Basically every transaction on the blockchain needs to be confirmed by miners (your tx data needs to be added to a block thats registered on the blockchain). Alas, the system is built so, that everyone can set their own transaction fee - but the miners automatically prefer transaction with higher fees. The transactions with lower fees can sit in limbo for hours, even days. All transactions are NOT and can NOT be equal, thus the lower fee transactions are always waiting and hence the slow network.
Here we arrive at the Lightning Network, a work in progress, that is supposed to alleviate the problem. So let's head to the Lightning Network page and see what they tell us about themselves. Lightning Network
Say what? Mumbo-jumbo. My mind automatically blocks out information when it's presented with long and complex compound words in technical jargon. Bidirectional payment channels? Ledger entry allocations? Broadcasting custodianships? Meh.
So basically - Lightning Network is an upgrade to the existing Bitcoin system. And it's aim is to take the repeating micropayments off the blockchain. There are currently multiple Lightning Networks in development and testing.
So the main idea behind Lightning Network is payment channels. Let's say there are services or users, who need to transact multiple times and small amounts between each other. Currently all these transactions need to be sent to the blockchain, to be queued and also they need to include quite a high fee. But in the LN case, there is a channel (imagine a tube) created between these two parties and the opening and the closing of this channel is the only thing recorded on the blockchain. As long as the tube stays open, the two parties (whatever service or users) can send BTC to each other via that channel - superfast and superfree. These parties will not actually be transferring Bitcoin to each other, but rather proof of ownership certificates. Once the business is concluded between these two parties, they broadcast the closing of the tube to the blockchain along with the final state of affairs - without the need to publish all the transactions, that took place in the middle. This will essentially reduce the load on the Bitcoin blockchain by a fair amount.
This is the basic idea and the full idea is much more complex and includes networked channels, meaning 3 parties don't have to have direct channel between them as long as 2 parties are directly connected via a channel, proxying the transactions.
There! I basically explained the concept of Lighning Networks in one paragraph. If you need more details, i suggest you hit up the 2 following links, which greatly helped me to understanding what LN actualy is.
Sources of help:
What is the Bitcoin Lightning Network? A Beginner’s Explanation
Check out Chainbb, an alternative frontend for STEEM network. If you like forum style, that's the platform for you.
Title image from pixabay
