Lightning Network: What is it and how it works?

Lightning Network is a layer-2 payment solution that operates on the Bitcoin blockchain to increase speed and reduce transaction fees. Thanks to that, transactions between users take place faster and more efficiently.

If you want to learn more about the Lightning Network concept, please take some time to read the following content from AZCoin.

What is Lightning Network?

Lightning Network is a layer-2 solution developed and built on the Bitcoin blockchain platform with the ability to reduce costs and significantly improve transaction speed. Accordingly, the biggest goal that Lightning Network aims for is a solution for Bitcoin transactions that can take place faster and more economically than traditional transactions.

At its core, the Lightning Network operates on the mechanism of creating off-chain payment channels between two users. This helps all transactions take place almost immediately but with more optimized privacy.

The Lightning Network also significantly improves the scalability of the Bitcoin blockchain by significantly reducing the load on the network.

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How does Lightning Network work?

Lightning Network allows direct transactions between two parties without the intervention of any other intermediaries. This way of working is called a peer-to-peer transaction model similar to Bitcoin.

Accordingly, Lightning Network will use payment channels to process transactions through the following process:

• Open payment channel: Two users deposit a certain amount of Bitcoin into the payment channel as proof of transaction participation, balance information in the channel will be continuously updated and shared without being recorded on the blockchain.
• Make transactions: Once the transaction channel has been established, two users can make one or more transactions at will, and the transaction information is updated to each person’s balance without needing to be recorded on the network. blockchain.
• Closing the payment channel: When the transaction is completed or two users do not want to maintain the transaction, they can close the payment channel and the final balance in the channel will be recorded in the Bitcoin blockchain.

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Advantages and disadvantages of Lightning Network

Advantage

• Solve the scalability problem, significantly increasing the number of transactions that can be performed at the same time.
• Increase transaction speed, greatly improving user experience.
• Minimizes transaction costs, making this blockchain suitable for small transactions.
• Improve practicality and promote the application potential of Bitcoin

Limit

• Not the most intuitive system for beginners lacking an understanding of cryptocurrency platforms.
• Do not allow users to spend more than the locked amount on the payment channel.
• Many types of attacks affect user safety and experience.

Lightning Network team and investors

Development team

The two main members behind the development of the Lightning Network project include:

• Thaddeus Dryja: Founder and engineer at Lightning Labs, former Founder of Mirror investment fund.
• Joseph Poon: Co-Founder at Lightning Labs, former Founder of the OMG network

Investors

On the investor side, according to our research, we know that the Lightning Network project has successfully raised 2.5 million USD in the Seed round from large investors such as Digital Currency Group, Kevin Hartz, Jack Dorsey,…

Conclusion

This is also the end of all the most understandable information about the Lightning Network platform. If you have any other questions, don’t hesitate to contact AZcoin.