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The increasing popularity and peak activity of the Bitcoin network towards the end of 2017 really emphasized its need to implement an efficient scaling solution. The bitcoin scalability problem has been well documented and at the forefront of development activity within the community. Most notably, lightning blockchain or the Lightning Network (LN) has been lauded as the long-awaited solution to sustainable, long-term scalability.

The LN is an open-source project with multiple different groups contributing to its development. With Lightning Labs launching the first mainnet Beta implementation of the LN earlier this year, the LN is off and running, and already showing some promising potential.

lightening stream

What Is the Lightning Network?

Proposed by Joseph Poon and Thaddeus Dryja in a white paper in January 2016, the LN is a layer 2 (off-chain) bidirectional payment channel system that utilizes Bitcoin’s native smart contract scripting language to facilitate instant payments between parties across a network of node participants. Users are able to transact with anyone that is connected to their network of payment channels through multiple hops by leveraging an innovative network routing framework.

Essentially, two users of the LN can open a payment channel between each other through broadcasting an on-chain transaction that initiates the off-chain channel and is published on the blockchain. Subsequently, they can instantly exchange funds with each other through the payment channel off-chain, instantly.  

Only when the payment channel is closed voluntarily or through hashed timelock contracts is the channel settled and broadcast to the Bitcoin blockchain.

Opening and closing payment channels will be an inconvenience to users in the early stages of the LN where utilizing the LN won’t necessarily work well for one-off transactions such as buying a cup of coffee at a random coffee shop. However, the potential capability of the LN to facilitate off-chain transactions without limitations between parties once the network scales to effective mainstream use, that do not even need to have direct channels open with each other, may eventually enable the Bitcoin blockchain to scale to millions of transactions per second.

Further, the results of the transactions and contracts between parties being conducted off-chain, but published on-chain, creates an environment where disputes are deterministically enforceable with the blockchain becoming the immutable backbone, despite the dispute arising through a second layer payment channel.

Recent Developments in the Lightning Network

Since Lightning Labs Beta implementation back in March, there have been a string of recent developments in the LN ecosystem, from additional implementations of LN compatible wallets to an assortment of simple games that use the LN.

Outside of Lightning Labs, Blockstream has also been helping to lead the way on LN innovation. Blockstream has collaborated on and created a number of LN developments including a drop-in solution for accepting lightning payments called Lightning-Charge, powered by their c-lightning implementation, as well as working on a consensus for interoperability of the LN between blockchains.

French cryptocurrency startup ACINQ developed their own LN compatible, mobile Android wallet called Eclair earlier this year and have even implemented a mainnet Lightning API called Strike as well.

Further, cryptocurrency payment gateway CoinGate even recently announced through their blog that they have launched a LN payment pilot with over 100 merchants, and they are one of several projects in the early stages of helping to promote the LN’s adoption.

Outside of the more formal implementations and technical developments, some more abstract representations of the LN’s scaling capabilities have been (artistically?) represented in Satoshi’s Place. A real-time digital graffiti art webpage powered by LN payments, Satoshi’s Place allows users to buy pixels on the digital canvas using LN micropayments and apply them as they please, creating both bizarre and clever illustrations.

Despite the fervent excitement surrounding the further development of the Lightning Network, there remains a small group of critics who have criticized the LN for potential future centralization issues and channel funding capacity. Notably, a recent study emerged from Diar that implied the LN is not very efficient at routing payments, especially payments of larger sizes. The study was seized on by LN critics but slammed by prominent voices in the LN and broader Bitcoin community, including Elizabeth Stark, co-founder of Lightning Labs, as well as Peter Todd, a Bitcoin Core developer.

Essentially, the argument against the study is that it does not take into account the fact that LN developers had been cautioning against using larger sums in LN payment channels for quite some time, as the network is still in the testing phase. Due to this, the study does not properly acknowledge the potential growth of the network and its ability to scale to meet payment demands once it is fully optimized, implemented, and available to mainstream users.

Looking Ahead

As the Lightning Network continues to develop at a rapid pace, it will be intriguing to watch how the various implementations come together and the potential future, scalable network that the technology can create for Bitcoin.

With a dedicated and active community behind it, the LN should continue to push the limits of blockchain scalability and offer the long-awaited solution to the Bitcoin network.

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