- Lightning Network Introduction
- Drawbacks of Lightning Network
- What’s next?
Lightning Network Introduction
Lightning Network is a layer two solution that is built on top of the Bitcoin blockchain. The concept of the Lightning Network was proposed in 2016, in a white paper. The reason for creating Lightning Network was to address the current issues of scalability with Bitcoin.
At present, 3 to 7 transactions can be processed every minute through the Bitcoin network. Whereas, traditional payments systems like VISA, can process 6,000 transactions per second.
For executing large transactions, such as international transfer of funds the speed and cost of the Bitcoin network, are far superior to its alternatives. But in everyday payments, it is important that there is an increase in the transaction speed and the transaction cost falls significantly.
Thus, Lightning Network is being introduced, as in this, the Bitcoin network will be able to process transactions at a very low fee, and with new uses cases like rapid micropayments, it will be able to process the payments quickly.
Drawbacks of Lightning Network
The most obvious concern with lightning networks, which are meant to be decentralized, is that they may duplicate today’s financial institutions’ hub-and-spoke architecture. Banks and financial institutions are the key intermediaries for all transactions in the current setup.
By having more open connections with others, lightning nodes for well-known enterprises could become equivalent hubs or concentrated nodes in the network. A breakdown at one of these hubs might bring about a big portion of the network (or the entire network) down quickly.
Another issue is related to the fees, in the lightning network the transaction fees must be increased to keep the network financially sustainable.
There is also the threat of attackers and cybercriminals as the lightning network will remain active 24*7. To prevent any loss of Bitcoin, the network has forbidden cold storage of coins.
There are so many vulnerabilities in the lightning network, which are yet to be exploited. The developers of the lightning network, are very confident in finding these vulnerabilities, as they believe that it will only make the network stronger. The developers consider it to be a necessary phase of growth. The developers are confident in fixing the vulnerabilities that have been identified.
Many challenges are being faced by the lightning network. But this is normal as it is still in its early days and such challenges are expected. Lightning developers will continue to work on the network to address all the vulnerabilities and to help scale Bitcoin on layer 2.
Disclaimer: The article should not be considered as any financial advice. It is advisable to conduct thorough research before investing.
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