One of the biggest criticisms about Bitcoin is that due to its 3-5 transactions per second (TPS), it’s not fast enough to support the way in which we use money in our daily lives, making its adoption as a modern payment questionable. Imagine paying for a coffee and waiting endless hours at the front of the line while the transaction is inserted into the blockchain and confirmed by the network. Or imagine having to pay $1 for a coffee and then having to pay a $20 fee to have the transaction included in the block. Neither option is feasible.
Small transactions work with traditional payment methods like a credit card because businesses such as MasterCard have the infrastructure to process more than 24,000 TPS. Bitcoin, in contrast, can validate seven TPS on a regular day.
This is where the Lightning Network comes into play!
WHAT IS THE LIGHTNING NETWORK?
The Lightning Network is a second layer added to Bitcoin’s blockchain that allows transactions between two addresses not on the blockchain network, instantaneously and with very low fees. Through these addresses, there can be many transactions, which remain in the perspective of a fiduciary exchange between the two participants. The moment one of the two participants decides to close the channel, the final balance of transactions is recorded on the blockchain including the storage of the two transactions, rather than the much larger number of each individual transaction.
Essentially, the Lightning Network will allow you to buy your money coffee instantaneously and with little fees!
HOW DOES IT WORK?
Let us give you an example:
Chris goes to his local coffee shop every morning and wants to pay with his Bitcoin. He could choose to make a small transaction for each coffee, but due to Bitcoin’s scalability issues, the transaction could take over an hour to validate. Chris will also be hit with a hefty fee, even though he’s making a small transaction.
With the Lightning Network, Chris can open up a payment channel with the coffee shop. Each coffee purchase is recorded within that channel, and the shop still gets paid. The transaction is instant and cheap. Then, when the Bitcoin that started the channel is spent, Chris can choose to close the channel or refill it. When the channel is closed, all of its transactions will then be recorded to the main Bitcoin blockchain.
THE FUTURE OF LIGHTNING AND BITCOIN
With the lightning network, the possibility of Bitcoin one day becoming a global payment method is not only feasible but likely. You see, Lightning is allowing for mainstream, daily adoption of Bitcoin. Elizabeth Stark, CEO and co-founder of Lightning Labs says:
“Bitcoin is programmable money, and Lightning can help scale it to billions of people across the world.”
With the Lightning Network, Bitcoin will be able to become cheaper and more efficient, making it easier to use in day-to-day life.
You can connect to the Lightning Network either by running a node or by using a Lightning wallet. There are apps you can download to your phone that make the process easy. Here are a few of our top picks:
- Wallet of Satoshi
- Bitcoin Lightning Wallet
- Blue Wallet
With cryptocurrency, you can own your hard-earned money rather than leave it to the mercy of a financial institution. And here at Coinstop, we want to help you secure your future! That’s why we stock the very best in digital security. From hardware wallets to recovery seed phrase storage devices, our products will help you to become your own bank. Cryptocurrency is the future, and it’s time to start securing yours!