If you're into cryptocurrencies, you may be hearing of the lightning network now and then. But what is it exactly, and how does it work?
This so-called lightning network offers quite an array of benefits at a glance. It seems exciting but hard to understand. For this reason, I did some research, and here's what I found:
The lightning network is a second layer technology in cryptocurrency. It works by using micropayment channels to scale the capacity of the blockchain. As a result, cryptocurrency transactions become faster, cheaper, and more efficient. Moreover, these transactions become readily confirmable than regular blockchain transactions.
While it answers the essential things to know about the lightning network, it doesn't explain everything you need to know. In this article, we'll cover everything you need to know to understand the lightning network process and how you can deal with it.
Without further ado, let's get into it!
What is the Lightning Network in blockchain?
As I said, the lightning network is a second layer technology. Simply put, it's a payment protocol operating on top of a blockchain-based cryptocurrency. One of the best examples would be bitcoin.
Its purpose is to make quicker transactions among the participating nodes. Moreover, it creates a solution to the scalability problem of bitcoin.
For instance, every transaction in bitcoin may cost a lot of fees. The lightning network intends to make small transactions quicker and more efficient. Thus, it saves both parties transacting from payments due for every activity.
The lightning network adds another layer to the blockchain. It enables users to create payment channels between two parties on that layer.
Such channels can exist for as long as needed. Moreover, since it's between two parties, the time it will take would be quicker, and the fee would be little to none.
How does the Lightning Network work?
To understand how the lightning network works, try to look at it this way.
For instance, every bitcoin transaction would cost quite a lot of fees. The reason is that the transaction goes through many intermediaries.
While it won't be a bother for significant transactions, it can be quite a pain for people who are transacting for smaller value.
The lightning network solves this problem by creating a payment channel between two parties.
Since this channel is between the two, both parties won't worry about transaction fees anymore for its transactions.
The lightning network poses an easy solution for people who regularly transact on small amounts. Moreover, it allows the blockchains to run more transactions in just a short time.
So, you may ask: how would you pay for the lightning network.
How do you pay for the Lightning Network?
Using the lightning network is relatively easy. Here are the steps you need to make transactions through the lightning network.
Get a lightning network-enabled bitcoin wallet.
The first thing to do is get a bitcoin wallet or any cryptocurrency wallet. The wallet you'll get should allow you to transact via the lightning network. Among the quickest and most simple ones are the Blue Wallet or Wallet of Satoshi. Both are apps available on the Play Store and App Store.
Transfer bitcoin into your lightning network-enabled wallet.
If you don't have bitcoin, you'll need to buy some. It would vary depending on your location, so it would be best to do some additional research on it. Among the usual places would be CashApp, Coinbase, and Kraken.
Start using your lightning wallet.
Once you have some bitcoin in your lightning wallet, you can use it to make a payment for goods or other transactions. It's as easy as scanning a QR code through your wallet app.
How do you use a Lightning wallet?
Once you have a lightning network-enabled wallet, you can already start using it for transactions. Here are the steps you need to take.
Put some funds in your wallet.
Before making any transactions, make sure you put some funds in your wallet. This fund will be the one you'll use for the transactions.
Open a channel.
Once you decide which partner you'll transact with, you'll need to open a payment channel with it. To do so, you'll need your partner's channel public key as well as its IP Address.
Make a payment.
You'll need an invoice to make a payment. Thus, if you plan on making a payment, the other party should issue a payment request to you.
How many transactions can the Lightning Network handle?
The payment channels used by the lightning network are quicker and much efficient. Thus, it promises to enable millions of transactions per second.
Thus, it makes your small daily transactions a breeze. Moreover, it will cut the costs from transacting through the blockchain directly.
The lightning network offers a handy solution for people who transact with cryptocurrencies. Through this network, people won't have to worry about fees for the small transactions they need.
Moreover, it scales the blockchain's capability and enhances its capacity to make more transactions for every second that passes.
In general, the lightning network makes cryptocurrency transactions faster, cheaper, and more efficient.