Since its inception in 2008, Bitcoin’s creator and proponents have viewed the cryptocurrency as a modern and fair method of conducting transactions and exchanging funds which could replace the existing (and arguably broken) financial system. However, there are several issues which have stood in the way of it really taking off as the currency of tomorrow.
These relate to the slow processing times involved in conducting Bitcoin transactions, as well as the excessive amount of computing power and the high costs associated with doing so. Now, however, the lightning network has revolutionized all of that by creating a system whereby users can deviate from the main blockchain channels to speed up transactions and make them more economical and efficient, all without compromising on their decentralized and highly secure properties.
What is the lightning network and why is it necessary?
For the uninitiated, “what is the lightning network” is probably the most frequently asked question on the subject right now. Simply put, the lightning network is a 2nd layer blockchain which diverts transactions off the main blockchain network. This means that instead of requiring excessive amounts of computing power to verify a transaction (and the time and money which go hand-in-hand with that), the lightning network can process the deal much more quickly and affordably.
It has been developed as a means of making Bitcoin transactions more efficient, allowing for potentially millions of transactions to take place every second. That’s a sizable step up from the handful of transactions (between two and seven) that the traditional method could muster. As well as saving its customers time and money and reducing the impact of Bitcoin on the environment (which has been the main cause of criticism in some circles), it also makes it competitive with other payment systems (such as Visa and Mastercard).
How is the lightning network being used in real life?
The lightning network is a technology that is still in its infancy and as such, new applications of it are surfacing all the time. Already, however, it is being used across the globe. El Salvador, for example, became the first country in the world to embrace Bitcoin as legal tender and its government has designed Chivo, a lightning-enabled wallet to facilitate cross-border payments. Since its launch, it has consistently been one of the most popular apps in the country.
Meanwhile, global companies don’t come much bigger than Twitter, as has been witnessed by its recent acquisition by tech guru Elon Musk for a whopping $44 billion. Since September last year, the social media platform has allowed its 360 million users to send “tips” (or Bitcoin assets) to one another using the lightning network quickly and free of charge. Indeed, it’s not even the first social media company to do so; Substack beat it to the punch the month prior.
Although the number of companies and countries which have fully embraced cryptocurrency is still small relative to other payment methods, its popularity is steadily growing – and innovations like the lightning network are only going to accelerate that process.
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