The Lighting Network is technology that is used on Bitcoins, and is used to make small payments. It weighs the effectiveness of blockchains to carry out transactions faster and effectively. Transactions using the network take less time, and they are already accepted which explains why they must not pass through the chain. The Lighting Network was designed to get rid of high costs by taking transactions off the chain. It does not only apply to Bitcoin, but can be applicable to any other transactions that have anything to do with Cryptocurrency exchange. Bitcoin had a technical problem of slow transactions which must be solved if they are to achieve their aim of being a media for everyday transactions.
Great numbers of transactions, and increase in number of Bitcoins needs more time, and can be expensive. They had to come up with a solution of solving the problem so that they reduced on the amount they spend. The controllers of Bitcoin saw it wise to use the network by creating another layer under their main chain. There are channels that approve payment between the users of Bitcoin, and users of this second blockchain. This network is simply a way through which parties in business can carry out transactions by sending or receiving payments. The transactions are updated on the main chain only after the two parties open a channel, and after they close it.
What makes transactions fast is the fact that two parties can send cash to each other without approval from the main block. That means the exchanges only need their approval and not from all the nodes in the main block. There is a channel on the network where individual parties can freely make payments among themselves through a network of lighting nodes. Lighting Network implements smart contracts, and signature scripts to build their objectives. When both the buyer and seller finance a channel, the funding transaction, the initial is created. In a multisignature environment, private and public master keys are exchanged, and it’s this exchange that controls access and how the funds are spent.
When it comes to the case of nodes, there are no signatures that are exchanged. This is because they do not want their expenditure known by the main block. That is why only the participants involved exchange a key between themselves that is used to state whether a spending is valid. After doing so, they are free to carry out endless transactions between themselves, and other nodes on the network. They give each other master keys after they complete dealing, and close the channel. The reason behind the fast functioning of the network is because only the parties involved need to approve their deal. There are no stages of approval provided the seller and buyer are in agreement, and complete the transaction they were carrying out.
Fees are charged on making use of the network, and this is combination of the routing charges, and information on payment. Even if the network is good and has high speed of approving deals, there are limitations that they must check on. The first problem is that they would lead to copying models that define majority of the financial systems. In the model that is currently in use, the banks and other institutions of finance are the intermediaries through which transactions take place. By creating connections outside the network contracts of big businesses can end up being centralized or having a similarity.
This means that a fail in one hub can have a negative impact by causing a crash of a big portion or even the whole network. Investors have questioned how the charges of this network
is constant even with time, and that is a problem they need to work on. There is need for them to raise the fee charged on users so that maintaining the platform is viable economically. This does not only apply to their platform maintenance, but also to help them deal with charges of Bitcoins directed to their network. They are also highly exposed to hackers and thieves since their systems must be online at all times to function effectively. That means a hacker can get to their systems at any time, and that explains why they must keep security of their systems tight to prevent leaks.