Lightning Network

Understanding the Lightning Network

The Lightning Network is a payment protocol called a “second layer” that operates on top of a blockchain. Its primary objective is to facilitate fast and scalable transactions between participating nodes, providing a potential solution to Bitcoin’s scalability problem.

Traditionally, transactions are conducted directly on the blockchain. However, the Lightning Network moves transactions off-chain, reducing strain on the Bitcoin network and decreasing transaction fees.

Bitcoin has faced criticism for its limited capacity to handle transactions. Currently, it can only process approximately seven transactions per second, while payment giants like Visa can handle tens of thousands. The Lightning Network acts as a second layer for Bitcoin’s blockchain, establishing payment channels that enable quicker transactions.

Unlike the standard blockchain ledger, where transactions require approval from nodes to ensure authenticity, the Lightning Network allows parties to transact with each other without the need for node approval.

However, there are costs associated with using the Lightning Network, and critics argue that this scaling solution is vulnerable to hacks. Additionally, users must remain constantly online, which can be challenging. It’s important to note that the Lightning Network does not support placing BTC in cold storage.