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Imagine going to a coffee shop to buy a coffee with Bitcoin. If you create a transaction on the blockchain to pay for the coffee…you’ll probably end up paying much more on the handling fee than the actual price of the coffee, not to mention the transaction takes forever to complete.
This is essentially how the Bitcoin network looks right now.
As the world’s first and most popular cryptocurrency, Bitcoin is struggling to keep up with the demand today. Users have to go through cumbersome procedures and pay quite a transaction fee before they can transfer BTC through the congested network.
In comparison to Visa, which reportedly handles around 25,000 transactions per second (with a peak capacity at 50,000 tps), Bitcoin is only capable of handling approximately seven transactions per second.
Is Lightning Network the Ultimate Solution to Bitcoin’s Scalability?
First described in 2015 by Joseph Poon and Thaddeus Dryja, Lightning Network is one of the various community proposals to address Bitcoin’s scalability. It creates a second layer on Bitcoin’s main blockchain for users to open multiple payment channels, deposit funds and then perform unlimited transactions between themselves inside the multi-signature wallet.
Transactions conducted on Lighting Network are instant and much more efficient, because it’s more like a balance sheet of BTC distribution without the actual transfer. When the payment channel is closed, only the most recently signed balance sheet will be broadcasted to the main blockchain, hence significantly reducing the block size.
Once Lightning Network is widely adopted for everyday use, whenever you want to buy a coffee from the coffee shop, as long as you’ve opened a payment channel with the network, you can perform endless transactions in the shared wallet. All you have to do is sign the updated balance sheet with your private key to confirm the transaction.
Although not fully operational yet, the power of Lightning has already been embraced by some crypto community members. A profound movement called Bitcoin Lightning Torch (#LNTrustChain) started on Twitter on January 19, 2019, where people transfer Bitcoin via the Lighting Network to community members they think are trustworthy.
This post originally appeared on Medium. Read more
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