What is The Lightning Network?
How does the Lightning Network make Bitcoin even more useful and efficient? Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.
There are so many benefits to the use of Bitcoin but the rapid growth of the network can cause issues. While growth is great for the overall space the technology itself is still very new. With this comes the issue of scalability. Currently, Bitcoin, on its own, can only process 7 transactions per second (TPS) as compared to Visa or MasterCard which can process thousands of TPS. This also leads to a build-up of pending transactions and higher fees subsequently.
In comes the Lightning Network which brings a scaling solution to the Bitcoin network. Theoretically, the Lightning Network can process up to 1 million transactions per second. Using the Lightning Network BTC transactions are processed faster and cheaper than if they were done on Bitcoin itself. This is because they send the transactions through micropayment channels for a higher rate of efficiency. This work is similar to Polygon, an Ethereum scaling solution, by moving transactions off the main chain to de-congest the main network which in turn reduces fees.
The Lightning Network does not only support Bitcoin; however, it also supports transactions for Litecoin, Zcash, Decred, and more. Since Litecoin is a fork of Bitcoin this is an easy implementation. This is also beneficial because it makes the two blockchains interoperable. This means you can swap your Bitcoin directly to the equivalent amount of Litecoin without your funds just disappearing. An example of this would be on Coinbase if you were to send BTC to an LTC wallet the funds would be lost because they do not currently support the Lightning Network.
Like anything else, there are still some issues that may arise from this. Since a company could technically make its own payment network the node would technically be centralized. This single point of failure could make it more susceptible to hacks. This is highlighted again since the Lightning Network is always online and currently can not support the use of cold storage or offline solutions.
In 2021, the Lightning Network grew 3x in its total capacity of BTC. From 1060 BTC in January to 3174 BTC in December. This proves that it not only works but people realize the potential of being able to send BTC payments quicker, cheaper, and more reliably. Even El Salvador processes all of its transactions through a Lightning Network application, Strike. The continued growth will do nothing but benefit the continued growth of Bitcoin and cryptocurrency in general.
