The Lightning Network Journey: An Overview
2019 was a great year for the Lightning Network (LN). It managed to grab the attention not only of its proponents, but especially of the wider crypto community.
The new development has been the subject of various publications and online conversations. Some pointed to the possibilities and enormous potential, while others expressed insecurity or disagreement.
Regardless, the Lightning Network is still one of the most interesting topics to talk about in the crypto space as it is also probably one of the most exciting crypto projects to date.
Here’s an overview of the Lightning Network journey to get a better idea.
What is the Lightning Network?
According to the Lightning‘s website, the Lightning Network is a decentralized system for high volume direct micropayments, eliminating the risk of delegating the management of funds to trusted third parties.
While it is believed that LN can be deployed on top of all blockchains, the capabilities mentioned in the definition are actually intended to address the technical limitations of the Bitcoin blockchain.
These restrictions would have hindered Bitcoin’s adoption as a peer-to-peer payment system, as its creator originally intended. On the other hand, they have encouraged many Bitcoin advocates to develop solutions to get Bitcoin back on track for the fulfillment of its revolutionary vision of being the ultimate P2P electronic payment system.
In 2016, two blockchain developers, Joseph Poon and Thaddeus Dryja, introduced the Lightning Network, which they claimed was the answer to Bitcoin’s technical limitations.
The technology has the ability to ramp up the number of transactions per second to almost unlimited at miniscule costs, while enabling instant transactions, making Bitcoin a viable option for payment methods.
The Lightning Network Challenges and Continuous Development
Like all new technologies, the Lightning Network also faces challenges, such as negative feedback from those who are skeptical about it.
The network itself has been continuously improved and developed since its public introduction. There are at least four blockchain companies – Blockstream, Lightning, Lightning Labs and ACINQ – currently actively developing and implementing the technology.
Here are some highlights of the developments that have been made or proposed so far to improve the network:
Adding money to LN channels directly from the Bitcoin blockchain via on-chain transfers is enabled and made more accessible by Submarine Swaps. Further development is underway to enable reverse transactions from off-chain LN channels to on-chain BTC address.
This feature increases LN interoperability between blockchains by enabling cross-blockchain transactions.
Splitting aims to improve the inefficiency of LN, even completely eliminating that prohibiting users from adding or taking the Bitcoin they assigned to the channels and the need to close the channels first in order to use the money . It works by enabling the parties involved to top up or withdraw the money directly from the channel without going through the regular procedures.
2. Security and privacy
The new functionality has been added to monitor transaction channels, reducing the risk of fund losses due to theft attempts by dishonest parties.
Eltoo is another proposed solution to improve the security of LN that works by preventing false alarms caused by software glitches, otherwise resulting in money loss.
Neutrino is a payment verification protocol that allows the process to be performed on the customer side.
The Autopilot feature assists users by recommending the “best channels” to send their payments. It scans the entire LN looking for routing nodes that are most active in managing the liquidity of their channels, assuming they can provide the “best service”.
Trampoline is the proposed new routing method for LN, which would significantly reduce the amount of calculations and data required by the current process to route payments across the network.
With the dual funded channel capability, a user can send a payment immediately after opening a channel, without waiting for the other party to return a payment.
- Atomic Multipath Payments (AMP)
AMP would make it possible to split large transactions on LN into smaller ones, making LN more feasible as a payment processor.
The Lightning Network Adoption
With a lot of things going on, it was just a matter of time for the Lightning Network to get the attention of crypto enthusiasts, especially Bitcoin believers.
It wasn’t until last year, when the Lightning Torch initiative, started by Hodlonaut and included many renowned crypto characters, that LN finally managed to get into the spotlight. Several crypto-focused media reported the torch movement and made it to the Lightning Network news headline.
Figuratively, Lightning Network’s statistics for the year 2019 show impressive growth. According to the data collected by CoinGecko, Bitcoin Lightning Network capacity showed an increase of 62% from the previous year, from 526 on January 1st, 2019 to ₿854 on January 1st, 2020.
The figure is even more exciting for the number of nodes with a 114% increase in the number of nodes, from 2,298 nodes on January 1st, 2019 to 4,923 nodes on January 1st, 2020. And in less than a month, the number of nodes reached 11,141 nodes on January 23, 2020.
When it comes to adoption, it is reported that many companies today have started to implement LN. In terms of exchanges, Bitfinex is the first major crypto exchange integrate the Lightning Network on its platform. It was not without its challenge, but there were also high-level learning experiences during the development process of the Lightning Network integration on Bitfinex. Users can now deposit and withdraw money from Bitcoin by simply connecting to Bitfinex’s lightning node.
Bitfinex also works with Bitrefill, a platform that allows people to buy gift cards and pay the bills with crypto, which also supports Lightning Network payment.
There may still be a long way to go before LN can realize its full potential. However, with such a passionate community and aggressive development, the future looks very promising for the Lightning Network. And it may not be too long for the Lightning Network to become a critical lever for Bitcoin’s value and mass adoption.