Bitcoin is the first cryptocurrency to be created. The crypto asset was invented in 2008 by Satoshi Nakamoto and it is now the most dominant digital asset in the crypto market.
With the adoption of BTC (bitcoin) as payment for businesses around the globe, the volume of daily transactions has also tremendously increased causing the network to be congested. When Nakamoto first invented bitcoin, he envisioned the cryptocurrency to be used primarily as payment. But for this to happen, the slow transaction speed and scalability in the network, the major obstacles to its continued growth should be resolved.
In 2015, Joseph Poon and Thaddeus Dryja proposed the Lightning Network as a solution to the long-standing issue on the network. In a definition by Wikipedia, the protocol is a “layer 2” payment protocol designed to be layered on top of a blockchain-based cryptocurrency such as BTC (bitcoin) or LTC (litecoin). It enables fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds.
In May 2017, Christian Decker of Blockstream made the first micropayment both on bitcoin and litecoin fully settled in a fraction of a second. In 2019, pseudonymous Twitter user hodlonaut run the digital game “lightning torch”. He sent 100,000 satoshis (0.001 bitcoin) to a trusted recipient. The recipient or the torchbearer then sends an additional 10,000 satoshis or $0.34 at the time to send to the next trusted recipient. Among the recipients or torchbearers were Jack Dorsey, Charlie Lee, Elizabeth Stark, and “CZ” Changpeng Zhao. The final payment accumulated with the lightning torch reached a total of 4,390,000 satoshis or $217.78 and was donated to a non-profit bitcoin organization in Venezuela.
The use of the Lightning Network also presents several benefits like the atomic swap. It was first executed in September 2017 by Charlie Lee, the creator of Litecoin, when he performed a successful cross-chain crypto swap with bitcoin and litecoin. The protocol allows the use of payments that are smaller than a satoshi according to Andreas Antonopoulos. Also, individual lightning network payments are not publicly recorded on the blockchain hence protecting the privacy of the sender and the recipient. And here’s the most important part. The protocol operates at a real fast speed with settlement time in less than a minute and can occur in milliseconds. In terms of scalability, there is no fundamental limit to the number of payments per second in the protocol.
The Lightning Network is now being utilized by a handful of cryptocurrencies like LTC (litecoin), ZEC (Zcash), and BOLT. The rise in BTC (bitcoin) price has also influenced the protocol’s adoption. In September, Paxful integrated the Lightning Network into its platform for transactions between individuals and to pay for goods and services. Bitfinex, one of the leading crypto exchanges is also using the protocol for its deposits and withdrawals while Bitcoin Social Network uses it to send content peer-to-peer through channels.
The network is also growing with more nodes and more channels and in a recent report in August by Yahoo Finance, the active nodes have exceeded the 25,000 mark. El Salvador’s Bitcoin adoption was also behind the growth of the protocol’s adoption.
In November, the activation of Taproot, Bitcoin’s long-anticipated upgrade gave Lightning Network a huge boost. Bastien Teinturie, the protocol’s developer stated:
“While Taproot brings many privacy improvements to the table, there are a lot of other, unrelated updates to Lightning that are higher priority and orthogonal to it, and implementers are already struggling to find time to review and implement everything. Please be patient, Taproot is coming, but it will take time!”
In recent data by Crypto.co, BTC (bitcoin) is now at $47,555 and has been on crazy price swings bringing the entire crypto down. But despite this, crypto enthusiasts made strong predictions of a bullish trend soon. If this happens, we would be expecting an increase in the adoption of the protocol even more.