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Analysis & Opinion

The Lightning Network – The Answer to Bitcoin’s Efficiency Woes?

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Just imagine the scene: you’re buying yourself a bubble tea, or are paying for a couple of hours of KTV, and you want to pay using a Bitcoin transaction. Suddenly, you find yourself locked in an awkward wait that’s so long you can start to feel your hairs grow, not to mention the growing ire of the patrons behind you, with their WeChat and AliPay wallets in hand. What’s more, the transaction fee has turned out to be as much as the bubble tea itself, so you’ve doubled your costs as well as your waiting times. This sadly is the reality of Bitcoin with its painful seven transactions per second (tps).

Bubble Tea: Could you buy with Bitcoin the future?

This, perhaps, is the price of being the world’s most popular cryptocurrency. But how can Bitcoin ever hope to match a company like Visa, which reportedly handles 25,000 tps (and 50,000 as peak capacity). Bitcoin may not yet be another “Visa,” but they have equally lofty ambitions, that’s for sure.

Enter: The Lightning Network
First envisioned by Joseph Poon and Thaddeus Dryja in 2015, this ambitious proposal is one of the ways to realize Bitcoin’s scalability. It involves building a second layer onto Bitcoin’s main blockchain, allowing users to create multiple payment channels, make deposits and do as many ultra-fast and efficient transactions as they need.

Lightning Network the future? (source: Coinadam)

Don’t think of it as an actual transfer of funds. The whole thing works more like a balance sheet. Upon the payment channel closing, the most recent signed sheet gets sent to the main blockchain. This means that the final block size is significantly reduced. This is a revolutionary concept — sign the sheet within the shared wallet, and you’re away You’ll be in and out with your bubble tea in no time!

While the system is not yet fully operational, a pilot scheme was started on Twitter on January 19th 2019 (#LNTrustChain) known as Lightning Torch. It has involved transfers of Bitcoin via the new network to members deemed trustworthy for the trial. If the plan takes off and finds its wings, could it be a major step toward thrusting Bitcoin transactions into the mainstream?

Bitcoin investor Tim Draper certainly thinks so. He said recently that in two years the world will buy coffee in Bitcoin, and by 2023 the barista will laugh at those who try to buy coffee in a fiat currency, maybe the Lightning Network is the start of this road to crypto acceptance.

Ashton Felix is currently a contributing writer for multiple crypto news sites. He got his big break when he mined his first bitcoin back in 2012. He enjoys learning about new technology and travels throughout Asia in his spare time. Ashton immediately fell in love with the culture and people of China. He is currently based out of Shenzhen and is fluent in Mandarin.

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