Lighting Network: A speed and scaling solution enhancing Bitcoin’s network

Blockchain technology is gaining momentum by auguring its various applications and use cases. We are entering a unique era in the timeline of the world's first and most renowned cryptocurrency, Bitcoin.

Bitcoin provides a low-cost method for sending remittances globally and serves as an alternative store of value. The Bitcoin network replaces financial intermediaries with computer code built on a decentralized ledger known as the Blockchain. Without the need for financial middlemen, Bitcoin has undoubtedly changed the dynamics of exchange for individuals and businesses worldwide.

Despite all its upsides, Bitcoin has some technical issues, such as slow transaction speeds and data-intensive network operations.

Bitcoin transactions require up to six subjective confirmations by the miners and nodes, depending on the amount transacted. This confirmation process can take a considerable amount of time. As the cryptocurrency ecosystem expands, the number of Bitcoin transactions will increase, resulting in network congestion. This affects transaction fees, confirmation times, and scalability of the Bitcoin network, especially for on-chain micropayment transactions.

The Lightning Network, an off-chain solution, addresses these problems. The Lightning Network settles transactions at nearly the speed of light. Handling all transaction amounts off-chain, this scaling solution expedites and reduces costs for micropayments. Lightning users can quickly pay for a cup of coffee with minimal transaction fees. The Lightning Network provides an effective off-chain scaling solution for Bitcoin, reducing costs and increasing transaction throughput and settlement speed.

Let's take a closer look at the Lightning Network to understand better how it operates, has additional functionality, and tackles the scalability downside of the Bitcoin mainnet.

Lightning Network Explained

The Lightning Network is a bidirectional layer 2 side chain that utilizes two-party payment channels to enhance transaction speed and throughput and also adds smart contract functionality to the Bitcoin network.

A layer 2 network is a separate network or application built on top of an underlying network or application called the Layer 1.

Scaled Blockchain networks should be able to handle millions or billions of transaction throughputs, also known as TPS (Transactions Per Second). In turn, because miners, computers that secure and verify transactions on the network, do not typically validate smaller transactions quickly, a scaled blockchain should also process all transactions quickly and efficiently regardless of the size or amount. Lightning network smart contracts automate this process, and transactions are only written to the Blockchain when lightning payment channels are finalized and closed.

Next, let’s understand how the Bitcoin Lightning Network (BLP) operates and the additional use cases it provides to Bitcoin.

How Does the Lightning Network Work?

The Bitcoin Lightning Network enables the creation of peer-to-peer payment channels using the Bitcoin Blockchain for initiation and settlement. To create a Lightning channel, an initial transaction called the ‘Funding Transaction’ is paid into the channel in Bitcoin (BTC) by one or two parties.

After the Lightning channel has been initiated, the parties involved are each given two sets of keys. The first key is typically held until the parties decide to close the Lightning channel. The parties exchange the second key to validate their 'Spending Transactions'.

The two parties can then conduct unlimited, disinter-mediated spending transactions between their lightning nodes and other nodes in the Lightning network.

Strike is one practical example of a platform that utilizes Lightning technology. Built on Bitcoin's Lightning Network, Strike - a digital Bitcoin payment platform - enables sending micropayments anywhere in the world, from your favorite restaurant or tipping from your socials like