The Bitcoin network can only handle around 7 transactions per second or TPS for short. By contrast, Visa handles around 1700 TPS on any given day, and it can scale up to 65 thousand TPS if need be Since block speed and block size cannot be changed without compromising speed, the only solution is to, and that’s to somehow process BTC transactions outside of the Bitcoin network or ‘off-chain’
⌛Lightning Network History⌛
The Lightning Network has its roots in Bitcoin creator Satoshi Nakamoto’s earliest writings, but its creation is credited to two brilliant developers: Thaddeus Dryja and Joseph Poon After more than two years of hard work and help from Bitcoin developers like Blockstream, the Lightning Network was completed in February 2018
👨💻How The Lightning Network Works Part 1👨💻
Unlike most layer 2 networks for cryptocurrency, the Lightning Network is not a blockchain. It consists of a series of interconnected payment channels created by two parties on the Bitcoin network Payment channels are created between two parties when each deposits BTC into a multi-sig wallet. This creates an off-chain protocol that allows them to exchange IOUs of the BTC in the wallet ⛓How The Lightning Network Works Part 2⛓ The Lightning Network can scale because it makes it possible to connect multiple payment channels together. Transactions are automatically routed between connected payment channels using hashed time locks which prevent intermediaries from intercepting the payment
👨👩👧👦Lightning Network Adoption👨👩👧👦
At the time of shooting, there are over 60 thousand Lightning Network payment channels around the world with over 100 million dollars in BTC locked in its multi-sigs While actual user adoption of the Lightning Network had a slow start, the pace picked up at the start of 2020 when Bitcoin Lightning wallet developer Zap released the now famous Strike app
🔎Lightning Network Issues🔎
Dozens of code vulnerabilities have been found since the Lightning Network launched in 2018, so much so that many still consider it to be in its testing stages even though it’s technically fully operational That said, the Lightning Network’s biggest problems are not technical, they’re structural. These relate to the opportunity cost of keeping a payment channel open, something which is slowly being resolved
🔏Lightning Network Privacy🔏
Government authorities in the US have been trying to crack the lightning network because its protocol is designed such that intermediaries cannot see where the transactions they are routing came from nor where they’re going. This theoretically gives the lightning network Monero-like privacy features.
📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.