Checking Out Bitcoin’s Lightning Network

Last week Lightning Labs announced the release of its Ind 0.4-beta.

The Lightning Network is a second layer solution for bitcoin that will provide instant payments, scalability, low costs, and cross-chain support via atomic swaps.

The release of the beta was significant as it means the developers feel it’s safe enough to use on bitcoin’s mainnet.

Lightning Network is the first Layer 2 solution that is built on top of the current bitcoin blockchain. And the basic idea behind it is that not every transaction will have to be broadcast to the network.

It uses what are called payment channels so that parties can conduct transactions with each other without having to upload each transaction to the blockchain, which can be time consuming and costly.

The best way to think about it is like a bar tab. You open it up at the beginning of the night. As it goes on the bartender records all your transactions. But you don’t settle up until the end of the night.

The Lightning Network will work in a similar way, enabling two parties to conduct an unlimited amount of transactions without having to touch the blockchain.

That alone will help scalability as bitcoin will be able to handle exponentially more payments than it did before.

Lightning Network is also super-fast, allowing for near instant payments.

And keeping transactions off the blockchain also significantly reduces fees. First, fees only come into play when the channel is closed. Second, fees are proportional to the payment amount, down to thousandths of a satoshi. That will make microtransactions possible.

Also cool is that with the beta announcement Lightning Labs also announced it received $2.5 million in seed funding from some big names in the industry like Charlie Lee of Litecoin and Jack Dorsey of Twitter and Square. Those funds will help continue development.

According to Elizabeth Starks, co-founder of Lightning Labs, "Bitcoin enthusiasts have gotten excited about this, merchants are excited about this. It feels like we're right on the edge of mass cryptocurrency adoption."

I can’t wait to see what’s next.

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