What is the Lightning Network?

Remember the guy who paid 10,000 bitcoin for 2 pizzas back in 2010? His name is Laszlo Hanyecz. In 2018, he bought 2 more pizzas with bitcoin. This time using the Lightning Network. He paid 0.00649 bitcoin.

What is the Lightning Network?

It is a 2-way payment network that sits on top of the Bitcoin blockchain and provides almost instant and almost free transfers.

Visa can process up to 65,000 transactions per second. Alipay has recorded up to 250,000 transactions per second. Bitcoin can process a measly 7 transactions per second. Bitcoin is unlikely to become a true medium of exchange with this sad processing capacity. Various solutions have been attempted to tackle the problem. The most promising so far is the Lightning Network.

Lightning Network is a 2nd layer that sits on top of the Bitcoin Network. The idea behind it is that every bitcoin transaction does not need to be processed in the main network. Micropayments can move to the Lightning Network reducing the burden on the main network.

How does Lightning Network work?

Let’s say I buy coffee from my favorite cafe every day. If I pay for my coffee in bitcoin and route it through the main Bitcoin network, the transaction fee charged to me will be higher than the price of the coffee. Also, I’ll need to wait at…