Lightning Network Overview

Lightning Network - Wikipedia

If you read the news of cryptocurrencies, you can find out that those who own Bitcoin often complain that the BTC network is slow, and you have to wait a long time for the transaction to take place. In order to make the exchange of cryptocurrencies faster, different solutions are used. One of the most effective in this regard is the Lightning Network.

Lightning Network: what is it

It has several definitions. It is a payment network for making transactions. The main goal of the network is to accelerate cryptocurrency payments. Another definition is a technical solution that is being developed as the second layer protocol of the blockchain network. It employs smart contracts so that transactions can be carried out at tremendous speed. This technical solution was presented 6 years ago at one of the conferences dedicated to the development of Bitcoin in Montreal.

Why is LN needed

As stated earlier, the main goal of the Lightning Network is to accelerate the functioning of the blockchain network, and to help make micropayments with low fees. To put it more simply, this solution enables all clients to engage in coin transfers directly without downloading the blockchain.

The Lightning Network node is designed in such a way that it solves several problems:

  • Transactions are getting much faster
  • The amount of information in the blockchain is reduced, and the load on it decreases.

In addition, the Lightning Network provides the ability for customers to remain anonymous on the network.

How the Lightning Network works

The main principle of activity is the use of payment channels, they contain funds that are transferred between users. In turn, the payment channel is a wallet that has a multi-signature function. This Lightning Network wallet contains a number of Bitcoins.

Channels are opened using a standard transaction, information about it is recorded in the blockchain. But then each of them goes directly, the information is no longer recorded in the blockchain.

Who is developing LN

As for the source code of the protocol, it is open source, and therefore there is no one single version. Companies use the protocol for their own purposes, changing it as needed. In particular, Lightning Labs, ACINQ and others work with him.

After the Casa Node release from Casa appeared, the application of the protocol became extremely easy for those customers who are not particularly versed in the intricacies of networks.

Where is LN used now?

It is used by crypto platforms. Cryptocurrency exchanges with the Lightning Network allow users to quickly process payments with reduced fees. This helps them attract more customers, and at the same time, it brings many speculators to the exchanges who want to make money on trading transactions.

The Lightning Network is also used for online wallets. Lightning Network wallets allow customers not to worry that their funds will be stolen, as the technology reliably protects them. In addition, this technology expands the capabilities of the Lightning Network wallets, and users can connect to a much larger number of stores that accept payments in cryptocurrency.

In addition, the technology is used in exchange services. The Lightning Network exchanger differs from all others in that transfers are carried out faster than in classic exchangers.

Now banks have also begun to use the Lightning Network technology. It is included in the internal processing system of banks, expanding its functionality.

New solutions offered by the Lightning Network

As technology continues to improve, it offers new solutions for users. Companies that are improving it periodically offer new solutions. For example, Submarine Swaps has been proposed to improve compatibility.

Thanks to it, on-chain transfers become easier and more accessible on the Bitcoin blockchain. Atomic swaps have also been developed, through this function the network gets the opportunity to interact with other blockchains and make cross-chain transfers.

To increase safety, so-called watchtowers are used. These features have been added to track transfer channels and reduce the risk of coin theft by intruders.

Another feature that is involved in the network is Eltoo. It is also designed to improve the overall security of the LN. Prevents false positives that can lead to loss of coins.

To increase the speed and efficiency of the technology, the “Autopilot” function has been introduced and is operating. With its help, users can search for faster channels for cryptocurrency transfers.

This function scans the LN and searches for those nodes that have the highest throughput. When such nodes are found, the client can use them in order to conduct a coin transaction. Channel search is very fast.

Are there any disadvantages to the Lightning Network?

There are no major flaws in the protocol, although the companies that use it indicate that it will still have to work a lot to achieve full compatibility with their architecture. Therefore, work with the protocol is constantly underway and it is premature to say that it has already been completed.


Thus, LN continues its development. It is being used by an increasing number of exchanges, exchangers and companies to improve customer interactions, increase the bandwidth of their channels and provide a higher level of security for their networks.

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