The original and main goal of Bitcoin, since it was conceived almost 10 years ago, is to establish a digital financial system without mediations from third parties: "a person-to-person electronic money system". To achieve this, a system is created in which, in addition to other technologies, all the participants (nodes) keep a copy of the accounting book (chain of blocks) and constantly verify the information. Insured by all, intermediaries are not needed.
But, as developers Joseph Poon and Thaddeus Dryja explain in the Lightning Network (LN) white paper, "if every node in the Bitcoin network should know every transaction that occurs globally, that could put a brake on the ability of the network to cover all the financial transactions in the world. "
Bitcoin has been used primarily as a store of value for this reason. The time of confirmation of transactions and the difficulty of scaling up its network for global adoption , as well as its volatile behavior in the market (like any cryptocurrencies without fiat backing), but for the security and freedom it offers compared to other intermediaries. centralized payment, has made many people tend to go to this asset to safeguard their money and not so much to spend it.
Despite this, bitcoin is still used as a means of payment and not only as a reserve asset. This makes it necessary to search for solutions that can cope with the increasing adoption (which can be evidenced in the increase of nodes and in the number of daily transactions) without compromising the decentralization and fundamental security of Bitcoin. This is shown in the following graph:
One answer to this problem is the Lightning network , which allows the creation of instant payment channels between people, processing transactions immediately and with minimal commission costs. In this way, bitcoins can be used to pay amounts of less than one dollar without problems.
These payment channels are created for a specific time and with a maximum amount that can be traded through it and connect directly or indirectly to both parties to a transaction. As this operation is done outside the main Bitcoin blockchain, only the final balance is recorded once the channel is closed, which also offers greater privacy.
This technology, which was widely debated in the bitcoiner ecosystem, was launched this year. Many users were enthusiastic about the possibility of using Bitcoin for its initial objective, so they started using it in both the test network and the main network to verify its performance. Equally, portfolios began to be created that allow interaction with LN and, in the last weeks, different games and interactive applications have been developed that require the use of the Lightning network to participate.
One of these applications is Satoshi's Place, an interactive whiteboard that allows you to paint pixels paying a satoshi for each one, received almost 3000 microtransactions in just two days of operation without affecting the performance of the main chain: the average cost of commissions was not increased nor did the network become congested.
According to data from blockchain.info , Bitcoin processes just over 150 thousand transactions per day. Lightning Network , on the other hand, is capable of making millions of transactions per second , as the number of nodes and payment channels continues to increase, which allows the network to support more operations. Currently, according to the explorer data , there are 2,295 nodes and 5,065 open channels and at least 10 nodes have a large number of channels. This constantly growing network has a current capacity of 2.3 billion satoshis (or 23 BTC) that equals 143.3 thousand dollars.
As Lightning Network allows the transfer of amounts of up to one satoshi, the commission must be less than this unit. This payment is counted in milisatoshis (msat), which equals 0.00000000001 BTC. Currently, the average commission rate is only 10 msat.
Another development that may contribute to its adoption is the creation of "underwater exchanges", a tool that will allow payments from other block chains , such as Litecoin, to services that have integrated the Lightning network. In this way it will not be necessary for both parties to use this technology.
Despite this, LN still has several challenges if it wants to be massively adopted . Developers must create more and better applications that facilitate payment with bitcoins to anyone, even if they do not know the technical foundations of their operation. It is necessary to develop portfolios and payment processors with simple and intuitive interfaces. In addition, it is important to encourage the creation of nodes, which will help expand the network and multiply the number of payment channels.
With this technology, the possibilities of using Bitcoin increase, both as a reserve of value and as a payment method . So far the tests have given favorable results and have shown developers what aspects of technology can improve, so that Lightning Network is able to support, as they advertise on their white paper, all the financial transactions in the world.