When Satoshi Nakamoto first unveiled Bitcoin in 2008, one glaring issue was immediately evident to the most luminous minds of the industry: Bitcoin has a scalability issue. This isn’t just an issue for Bitcoin, but for all veteran cryptocurrencies.
Obviously, industry pros are racking their brains to solve this problem, but what exactly is the problem? That is to say, what does scalability actually mean?
Take Bitcoin by way of example: it can only process around seven transactions per second. That was fine back in ‘08 when cryptocurrency was a little-known niche, but the system is now rather congested due to increased use. This means transactions take longer to process, and associated fees are much higher.
While Bitcoin may have grand dreams of serving as a decentralized alternative to popular payment systems currently in place, it simply can’t scale at a fast enough rate to achieve that goal.
As if Bitcoin’s seven transactions per second didn’t sound measly enough, it is especially dwarfed in comparison to Visa’s average of 24,000 transactions per second. The long and the short of it is, Bitcoin has some serious ground to make up before it can compete with mainstream payment systems.
This is precisely why the Bitcoin community has dumped so much energy into developing scalability solutions. Right now, it seems Lightning Network just might work. The essential logic behind Bitcoin Blockchain Network is that there’s no real need to keep track of every transaction which takes place on the blockchain.
The Lightning Network utilizes the blockchain technology which is already native to bitcoin; by using this smart-contract scripting language, the Lightning Network can create a secure network that operates at a much higher volume and speed.
Imagine two friends, Nigel and Ella, decide to take a trip together to a foreign country. Rather than carrying around large sums of cash, Nigel and Ella decide to set up a channel on the Lightning Network in order to seamlessly send money to each other without accumulating large fees.
Once their channel is established, Nigel and Ella can perform unlimited transactions between them because the transactions are simply viewed as redistribution of funds stored in a shared wallet. If, for example, Nigel needs to transfer 2 BTC to Ella, he will simply need to send her the ownership right of that amount; then, they will each be able to use their private keys to sign in to view the balance sheet.
The distribution of funds on the Lightning Network actually happens once a channel is closed. Using the most recently signed balance sheet, the algorithm allocates money appropriately at that time.
Lightning Network was first proposed back in 2015 by Joseph Poon and Thaddeus Dryja. Since then, three different teams have become involved with the development of the Lightning Network: ACINQ, Blockstream, and Lightning Labs. Various members of the Bitcoin community have offered their input on the project as well.
At their core Lightning wallets are normal Bitcoin wallets with a capability to open an Lightning payment channel on the first layer Bitcoin network. LN wallets are not very user friendly, possibly since the Lightning Network is still in its early stages.
Wallet of Satoshi The easiest experience available from a Lightning wallet certainly comes from this one. Though it is a custodial wallet, meaning you don't actually control your Bitcoins, Wallet of Satoshi handles opening channels and takes care of Bitcoin storage; it is available on both iOS and Android.
Breez Available on iOS and Android, Breez is an open-source, non-custodial wallet which manages opening the Lightning Network channel. Breez can also encrypt your channel state to Google Drive, providing ease of mind in the event of wallet loss or accidental app deletion. Bitcoin Lightning Wallet — This non-custodial standalone SPV node with Lightning Network functionality is available only on Android. While BLW gives you complete control over funds, it also requires that you open and manage payment channels yourself.
Bitcoin Lightning Wallet This non-custodial standalone SPV node with Lightning Network functionality is available only on Android. While BLW gives you complete control over funds, it also requires that you open and manage payment channels yourself.
Eclair Though there is little information available about this Bitcoin wallet with the option to connect to the Lightning Network, this much is evident: it is only available to Android users, and it’s quite popular with an average rating of rating of 4.6 stars.
Despite the fact that Lightning Network is still in its burgeoning stages, there are a handful of wallets that the public can use in order to try out this promising solution to Bitcoin’s issues of scalability. Of course, it’s worth noting that these wallets aren’t as tried and true as ordinary Bitcoin wallets, so large amounts of money likely shouldn’t be deposited in them. As Lightning Network becomes more popular all over the world, it seems likely that more and more wallets such as these will emerge.
Lightning Network seems to hold immense potential for addressing the glaring issue of scalability for Bitcoin. It’s worth pointing out that, depending upon what you use Bitcoin for, Lightning Network may not affect your experience at all—even if it is successful.
If you use Bitcoin as a long-term investment vehicle and nothing else, the current system is likely adequate to support your needs. In fact, you may be hesitant to switch over to a less-tested system like the Lightning Network.
On the other hand, if you are hoping to see Bitcoin replace other payment methods, then the Lightning Network could prove to be a dream come true if it lives up to the hype. Featuring instant micropayments, incredibly minimal fees, and heightened anonymity, it’s easy to see why the Lightning Network feels like a bolt of inspiration to so many in the Bitcoin community.