Lightening network
 Lightening network(Micropayment, Cryptocurrency)   | |
|---|---|
| Bitcoin micropayment protocoll |
The Lightening network was introduced in 2014 to overcome increasing centralization (now: platformization) and scaling problems in the bitcoin network.[1]
It is used in El Salvador as legal tender.
Background
Cryptocurrencies need a network of powerful computers running so called nodes. Smartphones are too slow to run nodes, redirecting users to centralized platforms such as exchanges for wallet applications. Platforms, however, introduce counter party risk: funds (wallets) have been stolen and confiscated repeatedly in the past. On the other hand the core network can not handle a large number of real time transactions, like i.g. the VISA system does.
The Lightening network uses the core network as foundation without consuming its network resources. This is done technically by opening up persistent friends-to-friends channels, building an overlay network, implemented by script (smart contracts) stored on the core network. The overlay network can handle thousands of transactions instantly with minimal costs (fees).
The paper[1] is a recommended introduction to the topic of smart contracts and risks posed by centralization. Similar solutions are available for Ethereum and other cryptocurrencies.
References
- ↑ a b Joseph Poon, Thaddeus Dryja (2014) The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments.pdf https://lightning.network/lightning-network-paper.pdf
