Why is Lightning Network Bitcoin’s Only Logical Next Step
You see, Bitcoin transactions have to be confirmed on the blockchain, which has limited block space to store information and can process only seven transactions per second. As Bitcoin’s use grew, the blockchain got congested, slowing the confirmations of transactions and increasing the associated fees. The introduction of Bitcoin’s Lightning Network aimed to reduce the weight on the blockchain, making transactions cheaper and almost instantaneous in response to the greater operational demand.
The heavy load on blockchain begged for a different method that would alleviate the congestion on the main net and create a better flow in bitcoin transactions. Lightning Network proposes an off-chain approach, in which users set up payment channels that only need to go on-chain when they are open or to record the closing deposit. This way, users only need to pay transaction fees when opening or closing the channel, the only two transactions registered on bitcoin’s blockchain. While the channel is open, the users can conduct unlimited payments, no matter how small, without paying any fees.
Being a custodian-free protocol, Lightning Network gives the users the possibility to conduct high-volume micropayments paying minimum or no fees at all. This makes Lightning payments perfect for daily transactions. For instance, you could buy mints for $0.50 with Bitcoin, using the Lightning network, without paying more in fees than in the actual mints.
We know that Lightning payments are carried out through two-way channels, where either side holds a certain amount of the funds locked up in a channel. Sending payments outside of a channel requires a routing transaction. Routing fees are only paid when you use another user as a routing node to pay a third party. Say you need to pay Janet 0.01 BTC but you don’t have an active Lightning channel open with her but so does your friend Alan. Well you can transfer the 0.01 to him, plus a few extra satoshis so that he can pay 0.01 BTC to Janet on your behalf.
Micropayments may be practical and useful for the average Joe, but let’s imagine for a second the potential Lightning Network has for people in countries struggling with economic instability issues such as inflation. Your earnings wouldn’t lose value because you would be conducting all your business transactions instantly in Bitcoin without paying fees to a bank or relying on your government’s fiat currency.
This leads us to another fantastic door opened by Lightning, digital transactions for unbanked people. Opening the possibility to conduct agile Bitcoin micropayments like this creates a variety of opportunities for the unbanked world population. People can start small entrepreneur ventures with minimum to no expense, expand them to every size and even invest in Bitcoin without opening a bank account.
Since the creation of Lightning Network, there have been developments towards solving the issue with liquidity, like the introduction of LSP and Lightning Pool. Node operators that need inbound liquidity to use the network can pay others to open channels for them, in exchange for some interests in Bitcoin, during an agreed time period.
Now that you know a little bit more about Bitcoin’s Lightning Network, BitKong could be the perfect opportunity scenario to dive into Lightning Network payments and have a little fun in the process.
BitKong offers the possibility to make instant deposits through Lightning Network.