Throughout the years, the cryptocurrency industry has continuously improved. Since it’s still a developing field, it’s not surprising that the first cryptocurrency dominates the market today. Despite the increasing number of altcoins developed, Bitcoin remains at the top of the list when ranking cryptos by market cap. Just like any other digital transaction, Bitcoin has also enhanced its features when it comes to trading and investing, allowing its users to achieve better security features and an excellent user experience. In 2015, Bitcoin’s network had a new layer called the Lightning Network. Have you heard of this term? If not, and it sounds interesting, you’re in the right place. Read on to learn about Bitcoin’s Lightning Network.
Bitcoin’s Lightning Network
Despite being developed more than a decade ago, Bitcoin still dominates the crypto news with its skyrocketing prices and dramatic downfalls. Despite that, many traders and investors still prefer to trade with Bitcoin, given that it has made people millionaires. Given the long list of crypto platforms, it can be challenging to choose one, especially for beginners. However, many crypto traders are hooked up with bitcoin-loophole.io. This platform connects traders with reputable market brokers who have access to advanced tools and possess the high-level skills and knowledge needed to trade efficiently.
Going back, the Lightning Network allows crypto transactions between parties outside the blockchain, especially micropayments. Since then, this new layer has been a game-changer in the evolution of cryptocurrency. Many have claimed that it improved the speed of the processing times of transactions and also reduced the fees that come with Bitcoin’s blockchain.
Even though this feature has brought significant progress to the industry, it also comes with challenges and drawbacks. Despite this issue, the Lightning Network still holds a promising future that will significantly benefit traders and investors.
Bitcoin’s Lightning Network: Advantages
The millions of people currently engaged in the industry and the thousands more added every month just prove that bitcoin transactions stored on the blockchain are overgrowing. With this second layer added to the network, the security feature is enhanced, and the data stored are one layer away from being involved in the issues regarding fraud, hacks, and other bitcoin transactions. Here are some of the notable benefits of this network:
1. Lower transaction fees
The Lightning Network grants financial freedom and substantial cost savings, which benefits businesses. Most often, 2-3% of small businesses’ gross revenue is wasted on credit card fees of vendors, suppliers, and utilities. But with the Lightning Network, these transaction charges would reduce. However, remember that you are your bank with crypto, and securing your funds independently relies on you.
2. Real-time payments
If you want to settle transactions using Bitcoin, it’s extremely fast with this newly-added network. All you have to do is send it over the Lightning Network using channels to contact your merchant or access your wallet. However, if you prefer to pay or accept in fiat currencies, just convert the fiat into Bitcoin in real-time. Before the network, investors had to go through a stressful process of transferring money which could take days to land in an account.
3. Less energy usage
Let’s admit it: Bitcoin is profitable and efficient, but its energy consumption deeply affects the process. But, it can be fixed with the Lightning Network by scaling non-proportionally energy usage and working on a peer-to-peer network. The second layer supports off-chain transactions and does not use complex computational power to confirm blocks on-chain or upload transactions.
Bitcoin’s Lightning Network: Disadvantages
Even though Bitcoin’s Lightning Network still presents challenges, its scalability and lower transaction fees brought a promising future to the whole system. Its main goal is to add the network to the bitcoin system so users can make payments without delays. However, it comes with challenges, too, such as:
1. Transaction fees are still there
Lightning Network has positively reduced Bitcoin transaction fees but does not eliminate the problem. Many users are concerned about the increasing bitcoin fees because of the congestion of transactions on the blockchain network. Developers have added a new network which reduced the payments, but we can’t deny that the crypto fee is still a tiny portion of the overall costs.
2. Nodes are becoming susceptible
Doing transactions such as sending and receiving payments can be done on the Lightning Network, but only if the nodes are online. You have to be online to perform these transactions, and we know what that means: storing funds or doing transactions online are at a high risk of being hacked. Even though the network allows offline storage, there are still risks associated and possible malicious attacks if the payment channel becomes congested.
3. Bitcoin’s volatility
We are no strangers to Bitcoin’s volatility and the crypto market in general. This price fluctuation could end your career in one night, but it also affects the network. The integration of the Lightning Network is known to be crucial for more efficient regular bitcoin transactions. Due to the volatility, companies are challenged to use bitcoin as a payment method to determine prices and product sales to customers from other business organisations.
The Lightning Network enables users to freely create new payment channels, which results in a faster transaction process and low transaction fees. As with every aspect of life, there are always two sides to the coin: the benefits and drawbacks. In Bitcoin’s Lightning network, it’s important to consider both sides. System developments are also essential to achieve an excellent user experience and an improved system in the following years.