Over the past month, the cryptocurrency market has lost almost 50% of its capital, the value of bitcoin has fallen by more than half and the negative news does not seem to be coming to an end. Now is the time for a more positive note.
The main reason for this bubble is that the share of greedy investors in the ecosystem is rather high, as cryptocurrencies still have very little practical value in everyday use. And for two main reasons: high service fees and a slow network. But this is perfectly normal. Remember the 30 minutes of dial-up mp3s? Then came ADSL, speeds improved in a few minutes. But then the movies came and again we had to wait for hours to download a quality movie from the internet. But the speeds improved faster until we reached the minutes again. Now the new speed motivator is the new demand for content – streaming. Streaming video and games requires even higher speeds, and optics are increasingly the solution. What is constantly repeating the pattern here is that demand is always one step ahead and at the same time it is the main motivator for technological development. The same pattern applies to bitcoin, for example. 5 years ago it was ok to make micropayments with bitcoin and the speed was not bad either. Today, however, usage has increased exponentially, creating both queuing and raising service fees. But there is already a solution – the Lightning Network.
It is a protocol and technology that is a so-called the next layer on the block chain and which makes mainly two functionalities possible: the offchain channel and the offchain channel routing network. The technology has been developed in various communities for over two years, and over the past six months, there has been active testing on the test network and error correction. But how does it work then?
Thus, every transmission is no longer sent to the public network pending approval, which is time consuming and expensive, but only the initial and final status is sent. Everything that happens in the meantime is up to the parties themselves. This means that the transfer is essentially instantaneous and costs nothing. In addition, the multi-layered onion routing technology known from the TOR network is used, which makes it possible to send private money transfers between different channels. A whole new level!
Let’s say I’m going to a pub, I’m going to spend the whole night there and have a better time. Now, paying for each beer separately with a card, the money always moves through the VISA network and various information systems to the bank. Takes time and service fees. Like the blockchain today. But when I open a bill in a pub and pay all at once at the end of the evening, it’s already a Lightning offline channel. Let’s say a few more friends join me who want to buy a beer in the same way. And we have settled in advance, maybe we have open channels for moving money with our friends. So they no longer have to open a separate account directly with the bar, but can pay through me. Irrespective of the type of asset. Namely, the technology “atomic swap” is also used, which allows automatic currency exchanges across the block chains on a current and fast basis. Maybe my friends will send me my litecoine and dashe, and the bartender will get bitcoins, all for a moment and with a very low service fee. This is already the Lightning network.
Of course, it is much more complicated technologically to ensure sufficient security and reliability, which is why very smart heads have been doing a good job for several years. Now it’s getting to the finish line and some applications have already quietly implemented Lightning support.
Apparently, this technology is turning the whole blockchain cryptocurrency market upside down in some way. Finally, we can talk about millions of transfers per second, with service fees of hundreds of thousands of cents, for example. This allows for faster cash flow on a large scale, regardless of the block chain and the underlying technology itself. As long as the block circuit meets the prerequisites for the Lightning Network, it can be the backbone for all transmissions. For example, it is possible to build decentralized trading robots that trade directly with authorized accounts in real time, without a central database. Maybe trading environments are no longer needed. Finally, micropayments of a thousand cents, for example, will be possible. In essence, it is possible to attach a measurable value to each movement, to each information bit, and at no cost. Payments between devices, payments in real time, payments with a minimum service fee and all this much more privately than bitcoin allows today. In this light, it would be said that what we have seen in the world of cryptocurrency to date is just the beginning. Lightning is just starting to roar.
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