2 years ago
Bitcoin’s Lightning Network is simply a Layer 2 exertion that offers galore advantages implicit altcoins for making Bitcoin into a peer-to-peer payments technology.
This is an sentiment editorial by Yuya Ogawa, a bundle technologist and co-host of the Diamond Hands community.
This nonfiction is based connected the contented of the “Understanding Lightning” study produced by the Diamond Hands community, the largest Lightning Network assemblage successful Japan. The study aims to supply an overview of Lightning’s exertion and ecosystem for a non-technical audience.
What’s So Special About The Lightning Network?
Bitcoin was brought into this satellite implicit a decennary agone to alteration peer-to-peer payments without the request for a trusted 3rd party. In bid to support this censorship resistance, Bitcoin limits its throughput to 1M vBytes per block, each 10 minutes, keeping it casual for anyone to tally their ain node.
The Lightning Network is Layer 2 exertion built atop the Bitcoin blockchain, enabling faster and cheaper payments, massively improved scalability and amended privateness without compromises to censorship absorption and decentralization. In this article, we relegate the technological specifics for different day, alternatively focusing connected Lightning’s censorship absorption and scalability characteristics.
Bitcoin scales by gathering layers connected apical of the basal chain
Decentralized And Censorship Resistant
Just similar Bitcoin, Lightning users tin tally their ain nodes and negociate their ain outgo channels. This is successful stark opposition to the immense bulk of emerging Layer 2 technologies successful the broader crypto ecosystem.
For example, rollups connected Ethereum beryllium on-chain arsenic a azygous on-chain astute declaration that stores the authorities of each of its users — arsenic opposed to thousands of chiseled outgo channels successful Lightning’s case. For Ethereum, an relation node is successful complaint of managing and updating this state, truthful introducing a vector for censorship oregon exploitation. Even if Ethereum and Solana were sufficiently decentralized and censorship-resistant networks, Layer 2 users tin beryllium affected if the astute declaration oregon relation node is censored oregon exploited.
In Lightning, each idiosyncratic creates outgo channels to make a monolithic web for payments. Thus, adjacent if a idiosyncratic is censored oregon exploited, the remainder of the web remains functional. Although determination is valid interest regarding the emergence of large hubs (popular nodes that pull galore outgo channels) and their vulnerability to censorship, adjacent successful specified a case, users are escaped to make alternate outgo channels to circumvent these nodes, if needed. This censorship-resistant dynamic, enabled by Lightning’s decentralization, is unparalleled by astir different Layer 2 technologies.
Massively Scalable
Payments connected Lightning usually traverse aggregate outgo channels to scope their destination. Typically, we spot payments that are routed implicit nary much than 4 oregon 5 hops (routing nodes). Assuming each hop takes 1 second, the outgo is completed successful 4 to 5 seconds. If the outgo requires zero hops, i.e., if you stock a outgo transmission with the destination, it volition apt settee successful a fraction of a second.
Fees are typically astir 0.1% of the outgo amount, truthful a $1 outgo is apt to outgo 0.1 cents successful fees. For zero-hop payments, determination is nary fee. The throughput of each node is limited, with Lightning Network Daemon (LND) benchmark results suggesting that a node tin process 50 transactions per 2nd (tps) out-of-the-box (see details here). However, arsenic mentioned successful the report, bundle optimizations should beryllium capable to bring this fig to 1,000 tps. Moreover, since the web tin process payments successful parallel, if 1,000 pairs of nodes crossed the web each relation astatine 1,000 tps, the web arsenic a full does 1,000,000 tps.
Lightning payments bushed different blockchains and the Visa network
Routing Nodes, At Your Service!
Just arsenic miners are incentivized by transaction fees and recently minted coins successful proof-of-work mining, the nodes that guardant payments crossed Lightning are incentivized by routing fees. A competitory marketplace for hashing provides information to the Bitcoin blockchain; a competitory marketplace for outgo routing results successful cheaper and much reliable payments connected Lightning.
Since routing nodes gain a interest each clip they guardant a payment, they people purpose to way arsenic overmuch worth arsenic possible. However, mispricing liquidity tin pb to unbalanced transmission capableness and routing failures — which payment nary one, including the routing nodes involved. In bid to maximize their revenue, routing nodes effort to equilibrium their channels, improving outgo occurrence rates and colony times crossed the network. More routing nodes besides means much imaginable routes which tin beryllium utilized arsenic alternatives, improving web reliability.
Routing nodes support Lightning decentralized and censorship resistant.
Summary
The Lightning Network is highly decentralized and censorship resistant acknowledgment to its reliance connected the Bitcoin blockchain wherever users tin freely make caller outgo channels. Furthermore, likewise to however a competitory marketplace for mining results successful information connected Layer 1, routing nodes vie with each different to supply unchangeable and competitively priced outgo forwarding connected Lightning. Bitcoin enables trustless payments arsenic envisioned by Satoshi Nakamoto implicit 10 years ago, and the Lightning Network is an effort to vastly amended its scalability without compromising connected those foundational values.
This is simply a impermanent station by Yuya Ogawa. Opinions expressed are wholly their ain and bash not needfully bespeak those of BTC Inc. oregon Bitcoin Magazine.
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