If you've ever bought something with Bitcoin or even sent some to a friend you know that feeling.
It's a nervous sentiment of not knowing why the transaction is taking so long.
Did I even send bitcoin to the right wallet address?
Why does that happen when crypto transactions used to take less time?
The short answer, congestion. With the increased popularity of bitcoin comes a price. The number of transactions has exceeded what the blockchain was built to withstand.
It's similar to some of the one lane roads we have here in Sarasota, Florida. Sure, when it's off-season it's not bad. But when the snowbirds are here in the winter, fuggetaboutit.
I've always believed that of bitcoin wants to be considered on the same level as Visa and MasterCard, then it must find a way to process transactions faster and cheaper.
Credit card companies are used to handling millions of transactions every day without a hitch. While it's great that the blockchain is decentralized, it's going to have to find scaling solutions to be able to used by the masses.
Sure, you can pay an extremely high mining fee for a computer to place your transaction at the top of the pecking order. However, is that really a viable solution?
There's got to be a better way. This is where the bitcoin lightning network (LN) comes into play.
The idea behind the LN is that you can complete transactions OFF of the blockchain.
How does that work?
I'm probably going to oversimplify this but that's what I do. The LN is basically an agreement or a line of credit set up by two or more parties in which they can perform bitcoin transactions between each other instantaneously because they're not actually recorded on the time and energy consuming blockchain.
Think of it like a bar tab. You roll in the bar at 9pm convinced that you're only going to stay for 1 drink and then move on. As you hand the bartender your card she asks you if you want to keep it open. Begrudgingly you agree to keep it open "just in case." Only you wind up closing the bar down.
Essentially, the LN is a bar tab that you and others can keep open for a few minutes to years at a time. When you any of you decide to close it out the tab is settled and then all of the drinks (transactions) get recorded to the blockchain as one transaction.
This frees up a lot of space on the chain and costs significantly less. It's a creative way of scaling and if companies start using it in the normal course of doing business it could produce the much needed scaling results.
If only the lightning network could get me to a Tampa Bay Lightning hockey game faster in this southwest Florida traffic I'd be set!