What is Bitcoin Lightning network ?
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Hailed as one of the most powerful cryptocurrency scaling solutions currently under development, the Lightning network effectively creates a layer over Bitcoin, allowing fast and cheap transactions that can settle in the Bitcoin blockchain.
Proposed by Thaddeus Dryja and Joseph Poon in a 2015 technical document, the idea is based on a network that is located at the top of the bitcoin blockchain and is finally installed in it. The network is made up of user-generated channels that send payments from one place to another in a secure and untrusted way (no trust means you don't need to trust or even know your counterpart).
Let's say, for example, that I wanted to pay you for every minute of video I saw. We would open a lightning channel and, as the minutes passed, periodic payments would be made from my wallet to yours. When I finished watching, we would close the channel to settle the net amount in the bitcoin blockchain.
Because the transactions are only between you and me and do not need to be transmitted to the entire network, they are almost instantaneous. And because there are no miners who need incentives, the transaction fees are low or even non-existent.
How does it work
First, two parties that wish to transact with each other set up a multi-grade wallet (which requires more than one signature to complete a transaction). This wallet contains a certain amount of bitcoin. The wallet address is stored in the bitcoin blockchain. This configures the payment channel.
The two parties can now perform an unlimited number of transactions without touching the information stored in the blockchain. With each transaction, both parties sign an updated balance to always reflect how much of the bitcoin stored in the wallet belongs to each.
When both parties have made the transactions, they close the channel and the resulting balance is recorded in the blockchain. In case of dispute, both parties can use the most recently signed balance to recover their share of the wallet.
It is useful to keep in mind that it is not necessary to configure a direct channel to perform lightning transactions: you can send payments to someone through channels with people with whom you are connected. The network automatically finds the shortest route.
The development of technology received a significant boost with the adoption of SegWit in the bitcoin and litecoin networks. Without correcting the malleability of the update transactions, transactions in the Lightning network would have been too risky to be practical.
Without the security of the blockchain behind it, the lightning network will not be as secure, which means that it will be used largely for small or even micro transactions that carry a lower risk. Larger transfers that require decentralized security are more likely to be made in the original layer.
Where are we now?
Although originally designed for bitcoin, the technology is currently being developed for a variety of cryptocurrencies, such as litecoin, stellar, zcash, ether and ripple. Litecoin plans to launch its version at the same time as that of bitcoin.
In December 2017, the new companies behind the three most active lightning implementations (ACINQ, Blockstream and Lightning Labs) revealed test results, including live transactions, proving that their software is now interoperable.
In addition, version 1 of the lightning specifications, which establish the network rules, has been published. This will encourage the development of other implementations and applications.
However, the network is not yet ready for launch. Engineers have not yet released software with which real users can perform transactions. Applications that support Lightning as a payment method are already emerging, but so far they are not easy to use.
That has not prevented some of those working on projects from trying lightning transactions on the bitcoin network. However, Lightning developers discourage this: it not only acts as a distraction for developers, but also puts user funds at risk.
Given the complexity of the code and the need for rigorous testing (after all, we are talking about payments), developers demand patience. In addition, lightning cannot be implemented at scale until SegWit extends more widely, so, although some believe there is enough SegWit support to run the mainnet network now, others predict that a usable lightning network could be of At least a year away.
In March 2018, California startup Lightning Labs announced the launch of a beta version of its software, making available what investors and project leaders say is the first version of the fully tested technology to date. . However, it is still early: the size of the transactions is limited and the launch is aimed at developers and "advanced users".
