What is the Lightning Network?
Blockchains are sluggish, and therefore, expensive. If I needed to send you some Bitcoins, you’d get them in about some hours, and I ‘d have paid a massive transaction charge too. With such a track record, how will blockchain technology take over the world? Any idea that can solve the lack of scalability of blockchain technology deserves attention, effort and time. Lightning Network is one such idea. However before we understand the service, we’ll require to comprehend the problem.
Why are blockchains slow?
Think about a blockchain as a register. And this register consists of some pages (blocks) where each page has some transactions. When a page in the register has been filled out with trades, it needs to be contributed to the register before beginning to record new transactions on the next page. Before a block can be added to the blockchain, there’s some processing that requires to be done to ensure that everybody agrees with the contents it contains. The procedure roughly takes 10 minutes (for Bitcoin Blockchain) for each block. To name a few things, a transaction contains info about the sender, the recipient, the amount and the transaction cost.
What is a transaction fee?
You can pay it to make miners include your transaction in a block as quickly as possible. There’s no set cost, and it’s entirely approximately you just how much you want to pay to accelerate the process. The higher the price, much faster your transaction will go through. At any given moment, there are numerous transactions offered to be taped on the current page.
How miners process transactions
The miners and the computers working in the blockchain network have to choose which of the available transactions to consist of in the present block. To help them decide, they take a look at which transactions yield the most rewards, implying that the transactions with the most significant transaction charge will be consisted of first. If there are enough transfers with a higher fee than yours to fill up the block, your transaction will have to wait in the queue. The more you pay in fees for transactions, the quicker your it will be processed.
What is the Lightning Network?
Lightning Network is a possible solution to the speed problem.The concept behind Lightning Network is that not all transactions are required to be recorded on the Blockchain. Imagine you and I transact numerous times amongst ourselves. However, we can bypass recording the transactions on the blockchain and bring them off the chain.
How does the Lightning Network work?
In the most straightforward terms, how it’ll work is– we’ll open something called a payment channel in between us and tape-record its opening on the blockchain. We’ll compose the final status of the transactions that happened through the channel on the blockchain. Utilizing this idea of payment channel, we can create a network of payment channels such that it would be just seldom needed to the transaction on the blockchain. Since you will not be touching the blockchain typically, the transactions will be occurring at lightning speed.
What are payment channels?
It’s like a safe-deposit box where two individuals deposit equal quantities of cash and each put a lock on it. This action of transferring equivalent amounts of cash in a standard box is taped on the blockchain in the type of an ‘Opening Transaction,’ and afterward, a payment channel is open in between those two people. The concept behind locking money in such a box is that nobody individual can invest the cash in the package without the other. The cash in this box is then utilized to transact between each other. To summarize, payment channel is nothing however a mix of pooling some money together and then moving the promise of ownership of the pooled-in cash in an agreed-upon manner.
How payment channels work
Closing a channel would suggest opening up the box and taking the cash inside. This opening of the package takes place on the blockchain, and the who owns just how much from the container is tape-recorded forever. That’s how payment channels work. However, that doesn’t even come close to defining their real potential. Their true power is released when two or more payment channels collaborate to form a network – The Lightning Network.