Lightning Network officially works! The first Bitcoin transaction was done outside the blockchain!

During the development of Bitcoin, there have been many problems from the beginning, and developers are still working on solutions. Scalability is one such issue. One of the main problems, however, is the ability of the network to handle a large number of small transactions. Ethereum is trying to solve this problem using the Raiden Network. The solution used in the case of Bitcoin is almost the same, but has a different name: Lightning Network. On Wednesday, December 6, a team of developers announced that the first Bitcoin transaction using the Lightning Network was successful.

What is Lightning Network (LN)

Lightning Network - not to be confused with Lightning Bitcoin, which is another Bitcoin fora scheduled for this month - is a protocol that allows you to create bidirectional payment channels outside the blockchain.

Imagine that John and Mary want to send 1 Bitcoin to each other. Bitcoin is deposited at a special address in the blockchain and via the channel on the LN can send it to that address back and forth until agreement is reached. The channel closes and the blockchain confirms the transaction. Such a payment model will be extremely useful in the case of Atomic Swaps, which allows users to exchange coins directly in various blockchains.

Joseph Poon and Thaddeus Dryja proposed a protocol in 2015 as a way to reduce fees, speed up transactions and increase network scalability. These changes would improve Bitcoin's decentralization. ACINQ, Blockstream and Lightning Labs have developed LN. Each team has developed its own implementation protocol - ACINQ - "eclair", Blockstream -, c-lightning and Lightning Lab's -, lnd. Since 2016, they have been working and carrying out tests to improve usability and make the LN more user-friendly.

The team considered the tests as good enough to announce LN 1.0. On Wednesday 6.12, they conducted the most important test - using different versions of the protocol to pay and receive payments on the main network Bitcoin mainnet - successfully!

Each rose has thorns

There is no doubt that what happened on Wednesday was a big event for the Bitcoin community. The version tested on Wednesday was version 1.0, which means that this is just the beginning of work on the implementation of the protocol on a larger scale. Let's hope that this will pave the way for people to use it.

Part of the community is not entirely convinced that technology will be able to fulfill all promises. Some people believe that although LN solves many of the current problems, it will also create new ones.

Even if transactions are made outside the payment chain and the transaction record via LN payment channels is registered in the blockchain system, then after closing the channel, this address is again used in the blockchain to confirm the transaction result. The truth is that the pressure exerted on the blockchains will be reduced, but not as much as expected. Also for people who will only use channels once, LN does not make sense.

Centralization of the network?

Another worrying news is that the Lightning Network can lead to network centralization. This is due to the fact that LN is not distributed by any entity, but is subject to decentralization just like Bitcoin. Addresses that are commonly used to deposit and create channels can become "payment nodes" by centralizing the network around them.

In addition, transactions in the LN network jump between the "starting point" and all possible paths leading to the destination. If John wants to send 1 BTC to Mary and there are 4 routes connecting John and Mary, John must have 4 BTCs in his possession, which will be divided into 4 parts and sent through 4 paths, until the first one reaches Mary. In practice, this means that people will never be able to send all their BTC to someone, as the same value has to be sent by every route.

What's next?

As everything related to Bitcoin, time will tell. Again, we can not deny that Wednesday's success was a huge and important milestone for the Bitcoin network and its future use as a real currency. The further development of the Lightning Network, as well as the changes and improvements that the team will introduce, will show us how great the success of the protocol will be.