If you’re here because you see a lot of talk about the Lightning Network and would like to know more then you’ve come to the right place. At Mining Syndicate we’re not only here to help everyone and anyone get started with Bitcoin mining, but we’re also here to help people understand all the parts that come with cryptocurrency.
What Is the Lightning Network?
The Lightning network is a second layer applied to the Bitcoin network. The second layer allows for faster and cheaper transactions, in particular, microtransactions. Right now, the Bitcoin network can take a long time to validate transactions due to high traffic.
However, with the second layer, some of that traffic can be moved over and prevent build-ups on the Bitcoin network. Think of the Lightning Network as an extra lane on the road that allows the traffic in the original lane to spread out to flow better.
How Does It Work?
Just like on the Bitcoin network, the Lightning network is made up of nodes running its software.
However, the difference between the two networks is that transactions carried out on the Lightning network are not stored by users on the network or publicly broadcast. Rather, the nodes transact on the Lightning network with each other privately. Channels are used by the nodes on the network to carry out these transactions.
Similar to the Bitcoin network, the Lightning network is made up of nodes running the Lightning Network software. Unlike the Bitcoin network, however, Lightning transactions are not publicly broadcast and stored by all members of the network.
Instead, individual Lightning nodes transact with one another privately. Lightning nodes use channels to execute such payments.
Pros of the Lightning Network
- Speed - the Lightning network is much faster at validating transactions, therefore, users can save a lot of time waiting around
- Lower Fees - the network allows for micropayments in a way that is different from anything to come before it. Without the network, users have to pay higher fees for simple, easy, transactions
- Security - since the Lightning network is still connected to the Bitcoin blockchain, it gets to benefit from the security protocols that the blockchain provides
- Privacy - users can make private transactions on the Lightning network which means that anyone interested can only look at the overall package and not each individual transaction
- Atomic Swaps - users have had the chance to test out atomic swaps on the network which means that they have been swapping one crypto for another without an exchange or other third party. Making these swaps on the network rather than an exchange means no fees, no wallet transfers, and faster transaction times
Cons of the Lightning Network
- Wallet Compatibility - users need to find a compatible wallet which isn’t too much trouble, however, this wallet then needs to be funded from a traditional crypto wallet. There are costs involved when making the transfer from the traditional wallet to the Lightning wallet
- Inconvenience - a small con but a con nonetheless. Aside from the fees involved when sending Bitcoin between the traditional wallet and Lightning wall, it’s also a hassle to keep making transfers
- Offline Scams - probably the biggest problem with the network is the ease of offline scams. If one user in a payment channel closes it while the other user in the channel is offline then the closer can steal crypto from the other user. When the other user comes back online they can’t do anything about it and have no way of contacting the closer
- Stuck Payments - unfortunately, from time to time, there are bugs on the network that cause problems like stuck payments. The stuck payment will be refunded but it can take days to process the refund as the network sees valid transactions as a higher priority than stuck transactions
- Regulators - if regulators don’t understand the Lightning network well enough, they may not enact proper legislation. Added to this, they may understand it but be wholly against the anonymity aspect of the network and find a way to shut it down
What Does the Future Hold for the Lightning Network?
According to DappRadar, currently, there’s over $110 million in Bitcoin locked into the Lightning Network. This number includes those paying for app services, goods and services, gambling, etc. This report shows that the network is being used and its popularity is continuing to rise.
While there are definite cons to the network, the pros are more than enough to justify its use and increase. And as with similar situations, with increased use comes changes and features to fix the cons. Just because there are some growing pains now, that doesn’t mean they won’t be improved or gone completely in a few years.
For now, the Lightning network is a great idea and a fantastic option for anyone who regularly deals with micropayments. The future of Bitcoin continues to look bright and these additions to the network are a welcome sight.
Expand Your Bitcoin Horizons with Mining Syndicate
If you would like any more information about starting or expanding your Bitcoin horizon; reach out to us at Mining Syndicate. Our mission is simple: Strengthen the Bitcoin network by enabling small-scale miners to affordably purchase and reliably host miners.
As a small miner, Chris became frustrated by the lack of hosting options available for miners with under 100 units. As luck would have it, he found a 2.5MW mining facility for sale right down the road, and thus, Mining Syndicate was born. Facilities #2 and #3 are currently launching and #4 and #5 are in the works.
Why is Mining Syndicate so successful? Because we have a team of people who are just like you, eager to be a part of the future of mining. If you would like more information about how you can be a part of Mining Syndicate, how our facility works, or the products we sell, you can reach out to us here.
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