The Lightning Network is one of the most effective solutions to this problem. We offer our readers a brief overview of the Lightning Network, prepared by the team of Boosty Labs – a fintech and cloud engineering company which integrates this technology into existing businesses and provides Lightning Network consulting services.
What is the Lightning Network?
Lightning Network is a technical solution that is being developed as a protocol for the second layer of the blockchain network. It uses smart contracts to enable transactions to be carried out at high speed.
The solution was first presented at the Scaling Bitcoin conference in Montreal in September 2015.
What problems does the Lightning Network solve?
The main purpose of the Lightning Network is to accelerate the functioning of the blockchain network, and to help make micropayments with low fees. In other words, this solution gives users the ability to transfer coins directly without downloading the blockchain.
The Lightning Network node is designed in such a way that it solves several problems:
- nsactions become much faster;
- The amount of information in the blockchain is reduced, the load on it decreases.
- In addition, it provides an opportunity for clients to remain anonymous on the network.
How does the Lightning Network work?
Lightning Network deploys payment channels. They contain funds that are transferred between users.The payment channel is a wallet that has a multisignature function. Channels are opened via a standard transaction, its data is recorded in the blockchain. But then successive transactions go directly, the information is no longer recorded in the blockchain.
Who develops the Lightning Network?
The source code of the protocol is open, so there is no one single version. Companies (Lightning Labs, ACINQ) use the protocol for their own purposes, changing it as needed. After the Casa Node release from Casa appeared, the application of the protocol became extremely easy for those customers who do not really understand the intricacies of blockchain networks.
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Where is the Lightning Network used?
The Lightning Network is used by many cryptocurrency exchanges. Thanks to the solution, their users can quickly process payments with reduced commission fees.
Lightning wallets give customers the freedom to worry about their funds being stolen, as the technology reliably protects them. Owners of Lightning Network wallets can connect to a much larger number of stores that accept payments in cryptocurrency.
The technology is also used in exchange services. The Network exchanger differs from all others in that transfers are carried out faster than in classic exchangers.
Recently, banks have also begun to use the Lightning Network technology. It is included in the internal processing system of banks, expanding its functionality.
What new solutions does the Lightning Network offer?
The Lightning Network technology continues to evolve. Companies that are improving it periodically offer new solutions. For example, Submarine Swaps have been proposed to improve compatibility. This solution makes on-chain transfers easier and more accessible on the Bitcoin blockchain.
The new atomic swaps feature allows you to interact with other blockchains and make cross-chain transfers.
To improve security, so-called watchtowers are used. These features have been added to track transfer channels and reduce the risk of coin theft by intruders.
Often, owners of Bitcoins and other cryptocurrencies suffer from slow network performance – they have to wait a long time for the transaction to take place.
The Eltoo feature is designed to improve the overall security of LN. It allows you to prevent the occurrence of false positives that can cause the loss of coins.
To increase the speed and efficiency of the technology, the “Autopilot” function has been introduced and operates. With its help, users can search for faster channels for transfers of cryptocurrency. “Autopilot” scans the LN network, and looks for those nodes that have the highest throughput. When such nodes are found, the client can use them in order to conduct a coin transaction.
What are the prospects for the Lightning Network?
There are no major flaws in the protocol, although the companies that are implementing it indicate that there is still a lot of work to be done to achieve full compatibility with their architecture.
It is being used by an increasing number of exchanges, exchangers and companies to improve customer interactions, increase the bandwidth of their channels and provide a higher level of security for their networks.