If you have been in the crypto world for a few years, you will surely remember the

If you have been in the crypto world for a few years, you will surely remember the Lightning Network experiment carried out on Twitter in 2019. Basically from address to address (like a relay race), 10,000 Satoshi were added to a transaction that passed from one country to another. The maximum transaction would have reached 4,390,000 Satoshi before "going out". The experiment wanted to prove that Bitcoin is unstoppable, incensurable and can travel anywhere.

Why was the Lightning Network invented? What connection does it have with Bitcoin?

Lightning Network tries to solve Bitcoin's scalability problem that creates a block every 10 minutes of up to 1 megabyte.

1 megabyte = 1,000,000 bytes

A Bitcoin transaction weighs an average of 450 bytes so making 1 million divided by 450 divided by 300 seconds (10 minutes), we get 3.7 TPS. If you think about it 3.7 TPS are few transactions so when the network becomes saturated it can take hours before the transaction is confirmed. It is certainly possible to pay more fees but the scalability remains low. I remember that a global payment system should guarantee thousands of transactions per second (TPS).

How to improve scalability

1) Increased block size (this solution was chosen by Bitcoin Cash which brought the block size to 32 megabytes or 118 TPS. Instead Bitcoin SV has increased the size to 128 megabytes and then with the Quasar update even to 2 gigabyte)

2) Improve the speed of the block (which is 10 minutes) then "bring them closer". This improves the scalability therefore TPS

What are the drawbacks? If you increase the block size, you will need bigger and bigger hard disk. The Bitcoin blockchain has already surpassed several gigabytes. You think what it would be like to increase this space by 32 times or 128 times! What does this mean? That you need more and more performing hardware so there will be fewer and fewer people mining by fostering centralization. If instead we approach the blocks, there is less time for the nodes to validate the transactions so there would be a need, also in this case, of super-performing machinery (data center). In this case there could also be errors / bugs (security problems), disputes between validators and increased storage space (because there are many more blocks).

HOW DOES LIGHTNING NETWORK SOLVE THE PROBLEM?

It is a side chain therefore an off chain solution (p2p). Transactions travel on a separate network. Once the funds from the Bitcoin blockchain have been transferred to this channel, they can travel from one wallet to another (always within the channel):

Bitcoin Blockchain (OUT) -> Lightning Network (IN)

Lightining Network (wallet A) -> Lightning Network (wallet B)

Lightning Network (OUT) -> Bitcoin Blockchain (IN)

Transactions therefore transfers are collateralized. You remember that there are always 21 million Bitcoin. If you transfer 100,000 satoshi, they will act as collateral and end up on the Lightning Network and become your "local balance". You can send to wallet B an amount equal to or less than your balance of course. In this off chain channel there will be all the transactions belonging to a wallet. All of this happens outside the Bitcoin network in a private way. Closing the channel brings back its balance on chain. If you had 1 BTC and you sent 0.6 to B, obviously you will be able to bring back only 0.4 BTC on chain. The invoice contains the hash of the requested payment that knows a certain wallet (hash time lock contract). All the channels opened by various entities in the network represent what is called "routing" because LN is composed of a dense network of nodes and channels.

The various transactions choose the fastest route, with lower fees and with less resistance. Exactly a little bit what real lightning does when discharged to the ground: they follow the path with the least electrical resistance! (they are generated by a high potential difference in the atmosphere)

Returning to LN, each node can decide its routing fee (some satoshi). However, when I send a transaction, the network will choose the preferential one with the shortest path and lowest fee. This is what a Lightning Network wallet looks like. Yes, it is basically similar to the classic Bitcoin wallets (mobile or not).

NEGATIVE ASPECTS OF LIGHTNING NETWORK

If fees are low, there are few incentives to keep channels and nodes open. It is less secure than Bitcoin and there may be vulnerabilities (remember this is a sidechain). Another problem is that if you don't have a node, when you open a channel (transferring your satoshis) you are using a custodial service. The open and closed channel has a cost and the network is somewhat centralized because there are few nodes.

Are you interested in ways to earn crypto bonus? Check it out here: Some Sites To Earn Crypto Bonus (Old & New)