Due to its popularity, Bitcoin has not been able to fully realize its potential. The design of the blockchain has slowed down transaction speed and increased costs. Researchers, developers, and the Bitcoin community are trying to find a way for Bitcoin and other cryptocurrencies to process more transactions. The best efforts to date have been directed towards a Bitcoin-based solution called Lightning Network, but can LIGHT solve Bitcoin’s scaling problems?
There are two limitations of a blockchain that can cause potential problems. The first is speed. In a blockchain, blocks are groups of transactions collected. However, when there are too many transactions, they are queued up. As the queue gets longer, the time it takes for transactions to be processed increases.
The second limitation is cost. Bitcoin is based on a mechanism called “Proof of Work”. This miner-based mechanism is quite old, making it cumbersome and expensive to operate. However, Lightning Network has a model that can solve this, and you can find everything you need to know about it in this Zatrun.com article.
What is Lightning Network (LIGHT)?
Lightning Network is a layer-2 network built on top of the Bitcoin blockchain. That is, it was built on a separate blockchain from Bitcoin, but it interacts with it. This network consists of a channel system that allows individuals or companies to transfer money between each other without the need to use the blockchain to verify the transaction. In this sense, it is like the current clearing system used by companies like Visa and Mastercard. When you make a payment, it is not paid instantly.
Instead, the funds from the buyer and the seller’s request are quickly verified, and the transaction is completed. So, funds are not transferred instantly from one account to another. Lightning Network is run by a network of nodes that process payments, and transactions are usually made using QR codes instead of complex keys.
In theory, the project makes small transactions on the Bitcoin network more economical by allowing thousands or even hundreds of thousands of transactions to take place instantly. This improves the scalability of the original blockchain network.
How Does Lightning Network Work?
Lightning Network allows for faster and cheaper transactions since it surrounds the main Bitcoin blockchain. It is an unstructured network built around Bitcoin, with channels consisting of peer-to-peer connections where any number of payments can be sent.
Nodes that direct payments ensure that the ecosystem runs smoothly. Nodes are run by ordinary people and companies that run a program on their computers or Raspberry Pis, making the layer-2 network decentralised.
To start using Lightning Network, any amount of Bitcoin needs to be locked in a payment channel. Transactions can then be made on the Lightning Network until the channel is closed. When someone wants to receive a payment, they usually create an invoice consisting of a long string of numbers represented by QR codes. To make a payment, the person wishing to pay simply reads the invoice with their Lightning Wallet, signs the payment digitally, and confirms the payment.
What is LIGHT Token? Is It a Good Investment?
LIGHT is a cryptocurrency used in the Lightning Network ecosystem. This cryptocurrency is also available on the BNB Chain and has several use cases on its layer-2 network. Like Bitcoin, the cryptocurrency is primarily used as digital cash, allowing users to make payments in the form of LIGHT coin at businesses and platforms that accept it.
LIGHT is particularly suitable for small-scale payments and provides the advantage of instant payments. This cryptocurrency also allows for anonymous payments and can process transactions within milliseconds.
With the increasing popularity of blockchain and the cryptocurrency industry, the number of transactions has also increased. As a result, congestion has begun to occur in Bitcoin, the largest and oldest cryptocurrency, leading to increased transaction times and gas fees. However, Lightning Network offers a solution to this issue.
Since its launch in 2018, LIGHT coin has made significant progress and is currently expanding based on other networks and use cases. In August 2020, the platform conducted an update that supports the Wumbo feature, which allows nodes to handle larger transactions.
An increasing number of cryptocurrency exchanges, including Kraken, OKEx, Bitstamp, and Bitfinex, as well as financial trading application Robinhood, are now supporting Lightning Network. Binance, the world’s largest cryptocurrency exchange, is also among them. As Bitcoin continues to grow, it can be said that Lightning Network and LIGHT will also grow.