What is Lighting Network
The Lightning Network is a method of enabling cheaper and faster transactions through a second layer built on top of the Bitcoin blockchain, therefore keeping the security of the base layer of blockchain fully intact.
What is the Bitcoin scalability problem?
The Bitcoin network has a limited capacity to handle large amounts of transactions in a short period of time. This means that the block in the Bitcoin blockchain is limited in size and this issue is called the Bitcoin Scalability issue. In simple words, scalability is the capability of the network to handle the network as it grows in size.
The good thing is that a lightning network solves this scalability problem.
How Lightning Network solves the Bitcoin scalability problem
Lightning Network is a low fee and scale-free solution that will potentially solve the Bitcoin scalability problem. When the transaction volume increases on the Bitcoin network, the amount of data that can fit a block remains the same, making it congested with a high transaction fee to process it. Lightning Network validates it off-chain making the transaction super fast and at the same time using a low fee.
Features of Lightning Network
The main feature of the lightning network is highlighted below.
Faster – Cheaper Transactions
Bitcoin lightning network has faster and has cheap transactions fee. This means that we can pay micropayments which were not possible before. Since transactions can be done in a few seconds means the adoption of Bitcoin in stores and daily uses will increase.
Enhanced Security Features
Since the lighting network is built on top of the Bitcoin blockchain, this means that the lightning network will have the same security features as the bitcoin.
It is more secure as Lightning Network payment also has a feature of private transactions whereby no one can look for every individual transaction but it will show the overall package. Lightning Network transactions are not visible on the public blockchain.
Lightning network will offer Atomic swaps. This means that now you can swap one crypto with another without using exchanges. This can be very useful as it will offer very fast swaps with very low fees. You will surely save the fee and tx costs which you incur on exchanges.
Lightning network benefits the miners as they can choose to validate larger transactions and earn larger rewards.
Use cases of Lightning Network
With the implementation of the lightning network, a lot of new use cases will open up where people can use Bitcoin lightning for their day-to-day transactions.
1- New revenue models in the industry
Since the payments could now be collected in cents, it will allow a lot of new industries and businesses to adopt Bitcoin. The payment will be more flexible and increase the total revenue for the businesses.
2- Tipping for the content creators
It may help the online business model and influencer marketing in the future. The Bitcoin lightning reduced fee can help in tipping for the video creator at YouTube, Twitch, and other platforms like Instagram.
3- Vending Machines
Lightning networks will help automate this business model. Right now if you use credit cards for the payments on the vending machines it is very expensive for small transactions. With almost no fee in lightning network, people can use vending machines and they may offer digital payments in the future.
4- API Services
API services with more data privacy can be used by the people and thus avoiding the monthly or weekly subscriptions. It can be more customized, user-friendly, privacy enabled. Examples include automated translation services API etc.