TD₿: A Look At the Lightning Network by Lyn Alden
TL;DR Examining the scaling method of the Bitcoin network and its evolution from a store of value to a medium of exchange.
Hey Bitcoiners,
One critique of Bitcoin that has plagued it since day 1 is that it can’t scale. Bitcoin can’t possibly work because it is too slow to be used as a medium of exchange.
The alleged knock against Bitcoin is that it doesn’t have the transaction speed capacity to handle the necessary economic activity to become a global payments network. However, Bitcoin is software, and solutions can be built on top of software.
The Lightning Network is a second-layer payment protocol built on top of the Bitcoin network that optimizes for speed and cost.
Theoretically, the Lightning Network can allow for millions of transactions per second that can settle at practically no cost. The graphic below from Arcane Research highlights how the Lightning Network improves Visa and Bitcoin’s shortcomings.
In case you missed it, Lyn Alden wrote a thorough overview of the Lightning Network and how it can help evolve Bitcoin from primarily a store of value to a widely used medium of exchange. (08/05/2022)
This piece will help you get up to speed on what the Lightning Network is and how it can improve Bitcoin’s functionality and propel it to new heights of adoption.
The question is…what new solutions will be built on top of the Lightning Network protocol? 🤔
Tick tock next block,
Cory Klippsten
Sign up for Swan and be buying bitcoin in minutes with best-in-class service.
Quote of the Day
“The distributed web won't be built on blockchains. However, it will be monetized via sats over the Lightning Network.” - Marty Bent, Founder of TFTC and Venture Partner at Ten31
Job of the Day
Strike is looking for a Director of Produce, Commerce passionate about creating a commerce experience and API platform that empowers and delights merchants and developers as they enter and participate in a bitcoin-native, superior financial experience.
Not your particular skillset? Check out all the Bitcoin jobs at bitcoinerjobs.com.
Featured Event
Tomorrow — Join SF Bitcoin Wednesdays from 5:00-8:00 pm at Ace’s. This bi-weekly gathering of Bitcoiners is a beacon of Bitcoin hope in the middle of the week. All experience levels are welcome.
Not in town for this? Check out all the Bitcoin events at bitcoinerevents.com.
Meme of the Day
In the long term, nearly every function of the internet will be ported to some layer of the Bitcoin network. The shift to cloud native applications makes it inevitable.
Theoretically, LN can execute millions of tx per seconds.
But there are two major problems with LN:
- you already need to be on the LN to use it, and you can't use it if you don't already own some BTC. You can't receive coins if you don't put some coins to open the channel. But to open the channel you need to do an onchain TX, and there is not enough space for everybody
- the security of the LN depends on timely txs to be published onchain with predictable fees, and that too is impossible if the network is congested because of the little space it has
Any amount kept on a channel greater than the average fee is de-facto custodial and can be seized by the node you are connected with.
Both problems can be solved by raising the block size, though.