In doing so, Lightning Network is trying to be an avenue to scale use cases that draw more people into the bitcoin network.
These use cases include:
Gaming and metaverse
A Case for the Lightning Network
Much of the potential for crypto growth has been hindered by the limitations that are inherent in layer 1 networks such as Bitcoin and Ethereum.
Most blockchain networks are preoccupied with providing security and decentralization which are essential for developers who wish to build on top of these protocols.
Ethereum founder, Vitalik Buterin, has described what he calls the Scalability Trilemma – you can’t optimize for security, decentralization, and scalability all at once. You can only optimize for two of these properties.
The solution to this problem has often come in the form of separate chains that are swifter and able to handle more transactions while delegating different degrees of security or decentralization to a layer 1 chain.
These include the likes of Polygon and Arbitrum for the Ethereum network.
The Lightning network was designed to scale the Bitcoin network’s base layer.
It utilizes Bitcoin’s base layer and protocol to abstract small transactions between users away from the Bitcoin blockchain.
With smart contracts, Lightning can settle the final balance of those payments into the base layer while ensuring that all transactions abide by the rules of the protocol.
According to Micahel Levin, Product Growth Lead at Lightning Labs, the network is based on a technology called payment channels. Payment channels allow for any two Bitcoin users to open up a channel with a defined amount of Bitcoin between themselves.
Within a payment channel, these two users can exchange instant, nearly free payments with each other as long as the amount of Bitcoin in the channel meets their bi-directional payment needs.
The Lightning Network takes this technology and builds a network of payment channels in a fully decentralized, permissionless way. That network of payment channels allows for anyone on the network to pay someone else on the network in an instant, cheap way, even if they don’t have a direct channel between them.
By not requiring the transaction fees or wait times that on-chain bitcoin transactions typically do, Lightning enables its users to enjoy affordable, fast, and private payments.