Bitcoin Lightning Network Is Live Now

Today, thousands of developers are running a new Bitcoin technology, the Bitcoin Lightning Network that is supposed to solve two major problems of Bitcoin, the transaction speed and the resource consumption. This new technology also makes the initial project setup and transaction costs more affordable.

Here are some details on the project from the official whitepaper:

What and Why.

The Lightning Network is a decentralized system for instant, high-volume micropayments that removes the risk of delegating custody of funds to trusted third parties.

Bitcoin, the world's most widely-used and valuable digital currency, allows anyone to send value without a trusted intermediary or depository. Bitcoin contains an advanced scripting system allowing users to program instructions for funds. There are, however, some drawbacks to bitcoin's decentralized design.

Transactions confirmed on the bitcoin blockchain take up to one hour before they are irreversible. Micropayments, or payments less than a few cents, are inconsistently confirmed, and fees render such transactions unviable on the network today.

The Lightning Network solves these problems. It is one of the first implementations of a multi-party Smart Contract (programmable money) using bitcoin's built-in scripting. The Lightning Network is leading technological development in multiparty financial computations with bitcoin.

How it Works.

Funds are placed into a two-party, multisignature "channel" bitcoin address. This channel is represented as an entry on the bitcoin public ledger. In order to spend funds from the channel, both parties must agree on the new balance. The current balance is stored as the most recent transaction signed by both parties, spending from the channel address. To make a payment, both parties sign a new exit transaction spending from the channel address. All old exit transactions are invalidated by doing so.

The Lightning Network does not require cooperation from the counterparty to exit the channel. Both parties have the option to unilaterally close the channel, ending their relationship. Since all parties have multiple multisignature channels with many di‑erent users on this network, one can send a payment to any other party across this network.

By embedding the payment conditional upon knowledge of a secure cryptographic hash, payments can be made across a network of channels without the need for any party to have unilateral custodial ownership of funds. The Lightning Network enables what was previously not possible with trusted financial systems vulnerable to monopolies—without the need for custodial trust and ownership, participation on the network can be dynamic and open for all.

Learn More.

Watch this video to learn more.


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