Bitcoin as the world’s first and leading cryptocurrency and has become an important means of transacting value. The Lightning Network allows any hodler of Bitcoin the freedom to send Bitcoin at little to no cost and solve many of Bitcoin limitations by providing instant and inexpensive transactions while achieving a throughput of approximately 1 million transactions per second.
Let’s explore what this means.
What Exactly Is The Bitcoin Lightning Network?
The Lightning Network is a scalability solution built on top of the Bitcoin network. People think of it as a Layer 2 solution to the Bitcoin Network that works outside of the chain. This means that bitcoin transfers are made between two parties on a second layer of the bitcoin channel that is built off-chain. This is done so that users can make bitcoin transfers and reduce network congestion on the chain. This allows users to quickly send and receive BTC with virtually no fees.
To start, a channel is opened between two parties where they can submit funds. They can then use this channel to send BTC between themselves instantly, with near-zero fees, without needing to broadcast every transaction to the base layer of the Bitcoin blockchain. Either party can settle on the Bitcoin blockchain and close the channel at any point in time.
A great way to explain this is how the toll road concept works, except instead of cars, we are moving Bitcoins. Except in this case, the toll road is slower than the feeder road. A layer 2 solution is much like a feeder road in how it connects along the side of a toll road (the second layer). Then, the Lightning Network payment channels are anchored on Bitcoin’s blockchain, much like an on-ramp or off-ramp is to a toll road. In short, either road leads to the same destination; it’s just that one has huge toll fees and the other road is essentially free.
Kraken has a great beginners’ guide to the Bitcoin Lightning Network.
What is the Lightning Network?
How does it work?
The Future Of The Lightning Network
In the last four months, the Lightning capacity has surged 25%, reaching 5,000 BTC ($100 million).
- The Lightning Network is poised to march ahead with higher and higher capacity.
- We have positive developments as the network looks poised for continued addoption.
- Many firms become more interested as the Lightning Network achieves more millstones.
Transactions for the Future
- Instant Payments. Lightning-fast blockchain payments without worrying about block confirmation times. Security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds.
- Scalability. Capable of millions to billions of transactions per second across the network. Capacity blows away legacy payment rails by many orders of magnitude. Attaching payment per action/click is now possible without custodians.
- Low Cost. By transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments.
- Cross Blockchains. Cross-chain atomic swaps can occur off-chain instantly with heterogeneous blockchain consensus rules. So long as the chains can support the same cryptographic hash function, it is possible to make transactions across blockchains without trust in 3rd party custodians.
Source: Lightning Network
MicroStrategy (MSTR), a tech company, is looking for a software engineer to build a software-as-a-service (SaaS) platform based on the Lightning Network. This is an exciting development. The job listing states that the Lightning Network software will provide companies with security and e-commerce products.
Being even more direct all a person needs to is review the Lightning Network Ecosystem below to see the gravity of the speed and growth this network is experiencing.
Investing In The Lightning Network
First, we recommend that you cost average into Bitcoin vs. buying the Lightning Network directly. Except we get it there is always the possibly even a low fee crypto assets rises in value as demand increases.
You can use Coinbase here:
- Check CoinMarketCap to see where you can buy Lightning Bitcoin and with which currencies. For each cryptocurrency, CoinMarketCap provides a list of purchasing options (also known as market pairs). Go to CoinMarketCap and search for Lightning Bitcoin. Tap on the button labeled “Market” near the price chart. In this view, you will see a complete list of places you can purchase Lightning Bitcoin as well as the currencies you can use to obtain it. Under “Pairs” you’ll see the shorthand for Lightning Bitcoin, LBTC, plus a second currency. The second currency is what you can use to purchase Lightning Bitcoin. If you’d like to purchase LBTC with the U.S. Dollar, look for LBTC/USD.
- Pick a platform to make your purchase. Different platforms have different levels of security, reliability, and liquidity. Before creating an account, do your research.
- Make the purchase on your chosen platform. Every platform has a different way of doing things. Some platforms are very easy to use, others not so much.Generally speaking, purchasing crypto with a fiat currency like the U.S. Dollar will be easier than purchasing it with another crypto.If you do have to purchase Lightning Bitcoin with another crypto, you’ll need to first create a crypto wallet that supports Lightning Bitcoin, then you’ll buy the first currency and use it to buy Lightning Bitcoin on the platform you chose.If you get stuck, most platforms provide guides. But if they don’t, there is a vibrant community of crypto enthusiasts that have likely posted guides on Youtube, Twitter, and elsewhere.
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