Bitcoin Lightning, simplified!
To cut a long story short, Bitcoin Lightning is a system that processes transactions outside of the blockchain.
As explained in this article, the Bitcoin network is based on blocks containing information about every transaction. Since space inside them is valuable, people love all kinds of solutions reducing the amount of information stored there. Similar to SegWit, Bitcoin Lightning is just another great idea that helps to make cryptocurrencies more convenient to use.
How does Bitcoin Lightning work?
It is insanely simple: if you don't want to pay for processing your transaction by a blockchain, just... don't put it there!
In Bitcoin Lightning you can create a new kind of wallet called a node, where you and people you invite can store their money. Then, you can make transactions "inside" it to rearrange balances in any way you want to, assigning money to each other immediately. There is no need to wait for blockchain confirmations.
When you decide to close that one, common wallet, the system calculates the difference between users' final and initial balances. Information about it is sent to the blockchain so everyone pays or gets paid according to their spendings and receivings.
We get to the same point as when we use regular blockchain but we pay less and got there quicker.
Scalability of Bitcoin Lightning
That's one of the most important thing that Bitcoin Lightning improves. Forget about current mere 7 transactions per second. With this upgrade, the Bitcoin network will be able to process hundreds of thousands of transactions within a single second.
How many transactions can I make using Bitcoin Lightning?
You don't need to worry about transaction limits. In the Bitcoin Lightning system, you can do as many transactions as you want before the node is closed. Also, it's up to you how long it's going to be active since there are no rules forcing you to close it at any point.
How to use Bitcoin Lightning?
Like it was said earlier, you need to set up a special wallet, where you and others can store some of your money. Actually that's it! From this point, you can make transactions just like you always did.
Is Bitcoin Lightning secure? What about privacy?
The fact that it works outside of blockchain can make some of you worry about transaction safety. However, there is nothing to be afraid of. Bitcoin Lightning uses private keys to authorize transfers so it is still protected by sophisticated cryptography.
When it comes to privacy, it is actually more discrete than traditional blockchain. All transactions happening inside a node is visible only to the participants of it. No info is being sent to the rest of the network
What is Bitcoin Lightning routing?
The name of this function speaks for itself. It finds the best route from one user to another.
When you want to send money to someone using Bitcoin Lightning but you are not participants of one node, the path between you two needs to be found.
The system will check if you have any available connections via other participants of the nodes you use to send your money like a cascade. Obviously, if there are many paths, the shortest one will be picked.
When is Bitcoin Lightning going to be launched?
It is being tested at this very moment but unfortunately, the exact date of Lightning launch is unknown. The network is growing and going through rough tests so there's no problem with waiting for it as long as we get a really polished product.