The Lightning Network Is Coming Faster Than You Think
For a long time the coup de grace for the bitcoin network has always been tier 2,3,4 ect solutions to the base layer blockchain. Even Satoshi in his bitcointalk posts talks about the need for layers on top of the base protocol for mainstream adoption. This has always been something in the far off distance, but with the scaling issues and expensive transactions we have seen in the past year, more work and contributions has been made on making the lightning network a reality. While it is still in alpha, the lightning network has been showing off some impressive demos on the test net and it might actually come to the main net quicker than you think.
The lightning network is basically a level 2 solution on top of the bitcoin protocol which lets you open channels with people that you frequently transact with and basically instead of using the blockchain for every transaction, you can just use it to settle instead. Theres a common misconception that you have to open up a channel with everyone, but if you think of it like a social network, if your friend opens a channel with someone you can transact to them too. There will likely be many nodes that open with a ton of people and use that as a way to bring people to use their nodes.
Due to actually being paid a bit in interest for using the lightning network if you run a node, people will be competing to run low cost nodes while staking their bitcoin. This essentially means that fees for transactions will not only be near 0, but the time it takes to confirm and send them is sub 0 seconds. You could literally do all the transactions on both visa and mastercard with the lightning network. The transaction per second capacity that the lightning network can achieve is most likely never going to be maxed out anywhere in the near medium or long term.
Lightning isnt perfect though, there still will have to be some on chain scaling that needs to be done. While things like schnorr signatures, which make transactions take less space and an eventual block size increase are in the works, lightning wont be an end all be all to scaling. The biggest problem the community will ultimately face with the lightning network is getting people to implement it. We have had segwit for a while now and many places refuse to implement it, many times because of ideological reasons cough coinbase cough. There is also the case of anonymity, which lightning isnt meant for. Lightning is great if you want to buy a coffee, but you still want to use the main chain if you are moving thousands of dollars around.
The growth that the lightning network has had in just the last few months however, has been astounding. People are actually using it on the main network as we speak (although its not recommended there are still kinks and it is in alpha). The estimation of 2 year that people were saying just a few months ago is probably more like 10-12 months. The team isnt making any claims as of now, and there are many things still left to be done, but they are getting more help and resources by the day in order to have things done. Lightning will be a massive step forward for bitcoin and at that point it will really test the potential of this technology.
-Calaber24p
Don't both parties have to be online for a LN transaction to clear?
Thanks for the analysis.
What are the milestones that need to be accomplished in order for for it to be usable on the main net? I see the 10-12 months, but I don't understand what needs to take place during that time.
I did read about people using it on the main net and transacting about 33k USD, but some of their issues suggest that it is still not ready.
Cheers,
dcj
They need to flesh out the technical bugs mostly. Also some added features that give layers of security like watchtowers. Basically they are trying to break it and fix the things that broke, rinse and repeat.
Exactly... "Layers of security" As I was reading through my major concern was security, how safe is lightning network??
Currently there have been a number cases of hacking bitcoin wallets... Would the lightning network solve this problem??
Very informative article... Thanks
Agreed, 10-12 months is a vague reference, what drives that specificity?
Good post!
Well bitcoin needed some updates
do you speak from experience, are you one of the LN developers?
Have you sent/recieved money via LN?
What is going to be the original impetus for its success, will exchanges be the first to adopt it, or is that too risky? What will be the first major entity to use it as standard? It's not like bitcoin has a ton of vendors to do this, other than maybe Overstock.com who has its OWN crypto-ambitions now.
Ive tested it on the test net sending a few transactions. Also seen people test it out as well with the fake starbucks store. Exchanges will most likely not be the first to adopt it, more than likely something smaller and easier to implement. I mean some smaller exchanges might but we havent been able to get all exchanges to agree on segwit yet. I think with lightning we will eventually see many more merchants start accepting bitcoin because it will be hypothetically possible to do microtransactions. Cant know for sure though. The devs also need to have a wallet that is easy to use or wallets need to implement it as well.
The only way that Bitcoin is going to recover is if the lightning network gets implemented in 2018. They're quickly losing their heavy majority stake in the market and risk losing the top spot to Ethereum (or other newer technologies) in the coming year if they don't get their code modernized to handle the increase in transaction volume.
I'm sure we'll see a lot of speculative investment in the coming months as more announcements come out about the lightning network. Hopefully it improves the currency enough that it becomes feasible to run small transactions again.
I disagree. Even if it came out in 2019 bitcoin would still be fine. Even as a store of value bitcoin shines compared to almost every coin.
Why do you feel that bitcoin outshines other coins as a store of value?
From my experience with Bitcoin:
All of these factors make for a bad currency. While the transaction fees and speed should be alleviated with the lightning network, that still leaves volatility. Arguably, all cryptos suffer from that one, so lets ignore it for now.
Mostly I feel Bitcoin's actual value comes from:
What scares me about the points above is that I can't find anything related to the underlying technology that gives Bitcoin its value. Everything that makes it a valuable currency is related to the fact that it was one of the earliest coins to hit the market, and it's one of the most widely accepted cryptocurrencies.
With emerging coins having faster transaction speeds, better utility, and lower fees, I don't see how Bitcoin is going to compete longterm, even with the lightning network.
Thoughts?
Apperently somebody already bought a real life object over LN. A VPN Router.
Amazing times! :D
https://www.ccn.com/instant-fee-free-bitcoin-payments-lightning-network-just-pizza-transaction/
Yeah I did hear about this, pretty cool, but still not recommended since its in alpha.
need the exchanges to get on board with lightning sooner rather than later, most are capable they just haven't enabled yet. I don't understand why, this removes wait time and fees. With so many new people coming into the space it would help to no scare them off with 20 dollar fees and 4 hour+ wait times on transfers
Yeah sadly we need exchanges to get on board with segwit first. Coinbase is notorious because their CEO Brian Armstrong disagrees on an ideological level. They were offline for a few hours and the mempool dropped significantly meaning not only are they not using segwit, they arent using any other space saving methods. Then they complain about high fees.
The lightening network has been live for a while but would need to get millions of Bitcoiners to use LN wallets and set that up. Its still going to be much easier just to use another Crypto with fast and low fees on chain. In 1 or 2 years it may have enough adoption to make a difference but for now its not very helpful. Segwit, that was went live in Aug. 2017 still only has less than 20% adoption. I am only trying to put things perspective. Don't take me wrong, I am not a Bitcoin hater but just disappointed with the way things went since 2015 for BTC development.
Its only live on the testnet, not the main net. People might be using it on the main net but the developers are telling them not to because its still in alpha. Segwit is a great improvement that people are choosing not to implement out of ideologies. They dont really care because ultimately the cost is shifted to the user and they can complain and push agendas. There will still be a problem with lightning that would be getting people to adopt it, but I think ultimately in the long run businesses that dont will end up getting hurt. People arent going to use coinbase if another site charges nothing to send coins. That is the hope anyway
This technology seems to be promising. Nice post @calaber24p