The good, the bad and the most talked-about thing in Bitcoin right now
1. It builds on Bitcoin’s existing network effects
The Lightning Network is not a separate chain — it is just a contract on Bitcoin. You could think of it as holding onto your original bitcoin, trading IOUs and enabling some additional features.
It does not require an ICO or AirDrop to attract new users, it is simply a matter of existing Bitcoin users connecting to the network — or using Bitcoin services that enable this for them.
So far, adoption is progressing ahead of expectations. Since the first mainnet implementation of Lightning went live for testing in January 2018 with 60 nodes connected, the network has grown to 4,398 nodes with 34,545 payment channels (as of the time of writing) according to Lightning Network Explorer.
Unfortunately, we can’t measure transaction activity in the same way we can with the Bitcoin base layer. On Lightning, transactions are private and so participants only see their own activity.
2. It makes Bitcoin more useful
Lower fees enable micropayments: Bitcoin fees are paid to miners as an incentive to secure your transaction in the limited space of a block. On the Lightning Network, you pay a fee to nodes providing the liquidity to route your payment. Whereas Bitcoin fees have averaged in a range of $0.1–$5 (spiking to $35 in the December 2017 rally), the average fee on Lightning is just 1 satoshi ($0.00079904). Micropayments above this value then become economically viable.
Instant payments enable commerce: Payment confirmations on Bitcoin take a minimum of 10 mins because that is the average time for each new block of transactions to be created by miners. 6 blocks (i.e. 60 mins) are preferable. Payments over the Lightning Network can route in seconds. So theoretically, you can now pay for your coffee with bitcoin, if that’s how you want to spend it…
Together, micropayments and instant confirmations allow for a unique property of Lightning on Bitcoin: money can now flow almost like energy to power new types of applications.
For example, Andreas Antonopoulos in his Mastering Bitcoin gives a great example of a video streaming service. Instead of paying a monthly subscription or watching ads to view content, it would be possible to pay for exactly as much content as you consume while you are streaming it.
Money as data flows from you to the service provider and video content data flows back to the user:
Enhanced privacy: Bitcoin is described in the whitepaper as peer-to-peer digital cash, but in reality it lacks the fungibility of cash. The Bitcoin nets completely transparent because every single transaction is broadcast to the global network. Lightning re-enables the privacy and fungibility of cash because transaction data is only known to the parties involved.
Additional programmability: Bitcoin’s programming language is intentionally limited to ensure the robustness and security of the network. The limited script language of Bitcoin is used to enable the Lightning Network, which can then enable additional features on the second layer without burdening the main chain with the extra data and expanded attack surface that would otherwise result.
A great example of this are “hold invoices” which enable payment recipients to cancel a transaction. This enables a number of functions which can be based on conditional payments:
- Transaction reversibility: Allows merchants to easily refund payments if a product is not in stock, or until the delivery of product/service.
- Block payments from unwanted senders: For example, an entity which must comply with financial regulations can block payments from a sender until it can verify they have passed KYC checks.
Read more on “hold invoices” and their use cases here.
Self custody user experience improvements: Too often when using crypto services, users are required to deposit their crypto with a third party and trust them to custody it. By opening a Lightning channel, you could pay for the service without actually depositing Bitcoin upfront. For example, imagine your favorite internet video calling app required you to pre-fund credits in Bitcoin. Instead of keeping your Bitcoin in custody on the app, you could simply fund in Lightning and settle the net amount with actual Bitcoin when finished.
It just makes Bitcoin sooo much easier to use: When only interacting at the abstracted layer of the Lightning Network, users don’t need to deal with the rather complex language of Bitcoin. REST APIs for JavaScript now open up Lightning payments to web developers. We are already seeing this create a renaissance in Bitcoin application development and my hunch is this will continue to grow.
Published at Sun, 14 Jul 2019 08:17:18 +0000
Bitcoin Pic Of The Moment
✅ Marco Verch is a Professional Photographer and Speaker from Cologne. ? This image can be used under Creative Commons 2.0. Please link to the original photo and the license.
By marcoverch on 2018-03-15 11:02:11
