Twitter wants to integrate Bitcoin Lightning Network into its platform. Some people believe Lightning Network is the future, but others doubt it.
To integrate Lightning Network, Bitcoin can make transactions faster and cheaper.
Before we dive into the Lightning Network, let's see what it's really all about.
What is Lightning Network?
This is a layer 2 bitcoin solution that facilitates transactions outside of the blockchain.
Blockchain is very slow
What's causing the blockchain slowdown is the verification process that miners go through. Not only does the process have to process transactions, it has to earn incentives, verify the transaction and broadcast to the public ledger. When traffic gets backed up, the process is expensive and inefficient.
Scalability is important
Bitcoin can make 7 payments per second compared to 24,000 from Visa, the credit card company. Who would want to use technology 3,500 times slower than the current system, even if it is secure?
How does credit card payment work?
The credit card payment system is a layer 2 solution to fiat currency. When you have a credit card to pay for your purchase, your money is not paid directly through the system. What it does is process the transaction records after a set settlement time period. However, credit card companies will verify both parties' identification and the purchase agreement for each transaction.
Lightning Network, similar to the credit card payment process
The Lightning Network looks like how a credit card works with only transaction records until all payments are finally settled, ready only to broadcast one last transaction to the blockchain.
Unlike a credit card
Within the Lightning Network, all parties will create a channel with a multi-signature wallet login and deposit into the account that all parties will initiate transactions until all parties complete transactions and close the channel.
Some disadvantages of Lightning Network
There are 3 concerns about the Lightning Network:
-total costs
-security concerns
-price fluctuations
Total costs
There all multiple costs include open and closed channel fees, routing fees and blockchain process fees.
The concern is that the overall fees may be higher than the blockchain process.
Security considerations
Since it requires all nodes to be accessible online, it increases the possibility of hacking.
Price fluctuation
As the price of bitcoin fluctuates, all settled transactions can lose what they were before.
Spam on the Lightning Network can also fill the system
If hackers spammed the system by sending multiple transactions and intentionally increased network process fees, the system could become overloaded and expensive.
Quick Adoption
Despite many concerns about the Lightning Network, many companies are moving forward to adopt it because it is definitely a possible solution. However, the security of the system may need to be tested before it is fully functional.
In conclusion
Lightning Network is a possible solution for bitcoin scalability. However, security is indeed an issue that will be very costly to attack the network.