What is Lightning Network and how can it be helpful for bitcoin?

Man holding Bitcoin gold coin in front of lightning network concept background. Slovenia, November 17, 2018

As we all know today’s time is the time of cryptocurrencies and most of the population of the world knows about cryptocurrencies. The main cryptocurrency which is used by the maximum population is Bitcoin. Bitcoin is a decentralized type of cryptocurrency which does not require any interference from government banks or Third-party agencies. We can do Bitcoin transactions to pay money for buying things at various places like overstock.com for buying stocks, Microsoft Office a car and many other things. Just like in banks we have to pay the required fees for transactions. As said earlier the Bitcoin is a decentralized cryptocurrency and transactions do not require banks or third-party agencies. The Bitcoin transaction cannot be turned down by the government or banks. But if you’ve noticed when you try to transit during busy times, the transaction performed may take a lot of time to get confirmed and if the fees are very small it may take 2 or 3 days to be confirmed. it is the only glitch in the Bitcoin transaction. It is due to this server of Bitcoin as they do not allow a lot of transactions at a time. Just like Visa has 65,000 transactions per second capacity and it can handle the traffic of up to 65,000 transactions it does not show the glitch but in the case of Bitcoin, it has only 7 transactions per second allowed which is very low as compared to other transactions and it requires a lot of electricity. This is the issue mainly for micropayments. If you want to read more about Bitcoin Evolution then you can read from here.

  • Lightning network: To solve these issues the lightning network was introduced which are instant and do not require any fees for the transaction. Now the question arises what is lightning payment and how does it work. Well, the answer to this question is that the lightning transaction is like a layer over the top of blockchains which in general is the set of rows. For example, if the Bitcoin blockchain is the first layer or ground level of a building then the lightning network is the second layer or the first floor of that particular building. It was developed by Joseph Poon & Thaddeus Dryja in February 2015. It was generally designed for the micropayments which were under the mark of Satoshi. Just like transactions are recorded on blockchains but in the case of a lightning network, it does not require a chain record rather an off-chain record.
  • Payment channels: Now let me tell you how the lightning network works. For lightning network usage, we have to develop or build payment channels between the 2 persons. For example, if 2 persons have to make a micropayment transaction through the lightning network, they just need to make a payment channel that needs a security deposit of a particular amount which is equal to or more than the transaction to be done. Once the channel is developed the 2 persons can perform the transaction without any problem and it would be instant and free of cost as it does not require any kind of fee for the transaction. Once the transaction is done and the 2 people do not want to perform a transaction, a further date test closes the payment channel and the record that is the final record of the transaction is sent to the blockchain. The blockchain has the record of only 2 transactions which are the security deposit and the final transaction after the closing of the payment channel and it does not have the record of the transaction performed by the payment channel between 2 persons. On a simple note, you can understand that F the officials want to have the record of the transaction. They just know how much amount is being transacted but do not know the sender or beginner and receiver or destination.


  • It is instant and does not require any fee for the transaction.
  • It is secured and one can use it for micropayments.
  • The record is off-chain due to which there is less traffic.
  • If one person wants to back out from the transaction, he just can take the deposit and leave which results in the closing of the payment channel.
  • Due to the payment channel the person gets all the advantages of Bitcoin, all the facilities of Bitcoin and does not feel any problem.

As there are advantages of payment channels that are lightning network but there are some disadvantages too and the main disadvantage is that the lightning network is being used by the drug dealers because of its one property of saving the record of chain and not letting the person know who was the sender and who was the receiver and for what purpose the payment was done.

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