In March, what we think is a major development in the usability of blockchain was rolled out. Layer 2 protocols make all transactions faster, after an initial two-party channel is established, and reduce the cost. Without the hindrances of cost and time, many kinds of uses, including micro-payments, become more suited to blockchain. So what’s the basic structure of Lightning Network? Elizabeth Stark @starkness, Co-Founder of Lighting, gives this lay-person’s definition (via CoinCenter):
Lightning Network is based on a technology called payment channels. A two-party payment channel is created when both parties create a 2-out-of-2 multi signature transaction on the blockchain, with at least one party committing funds to the 2-of-2 ledger entry. Each person has one private key, and transactions spending from the ledger entry can now be made only if both keys sign. This initial transaction to open a channel takes 10 minutes (or whatever the normal block time is), but afterward the participants can transact with each other instantly using the funds allocated in the the channel. These instantaneous transactions are made by passing signed transactions back and forth, spending from the 2-of-2 ledger entry.
In March, Lightning Network debuted on the BTC Mainnet with a value cap, as an initial real-application test of the technology.
We are definitely eager to see if this technology is able to succeed, and, if so, what new exciting applications it will enable. Thus far, blockchain is restricted by speed. Notably, according to Hacker Noon, “Bitcoin can support up to 7 transactions per second as compared to the 2,000 transactions per second typically processed by Visa (with the potential to scale to an estimated 56,000 per second)…. Lightning Network essentially brings a smart contract-like capability to Bitcoin transactions in a way that allows transactions to take place off chain.” Being able to speed up and lower the cost of blockchain transactions makes all kinds of applications more plausible and sound.
Below, Stark talks about the potential of blockchain, with added scaling technology, to bring the internet back to the kind of decentralization that was so revolutionary in the 1990s. Take a look as she walks through a currency application (towards the end, she talks about the many thousands of transactions per second, which could be used for dapps):
As we at BitClave build BASE, we are taking the considerations of scalability and efficiency seriously. To build an alternative to traditional search engines requires a highly usable ecosystem, which, according to our dev team, might include secure P2P channels, using technologies similar to Bitcoin Lightning Network or Raiden Network, a similar channel-based system.
