The Lightning Network (LN) has been proposed as a routed network with a bidirectional payment channel that is connected end-to-end. It acts as a second layer added to the Bitcoin network where that allows transaction to occur off the Bitcoin Blockchain. This kind of network can ensure that all participants can route a transaction between channels without trusting any intermediaries.
Lightning network is defined as a certain design for a routed payment channel network, which has now been executed by over five open source teams. The independent executions are regulated by a set of standard, described as the Basics of Lightning Technology.
The lightning network is a feasible means of executing routed payment channels. There are lots of other designs that are aimed at achieving similar goals, including Teechan and Tumblebit.
Lightning Network Transport and Routing
All forms of communication between Lightning nodes are encrypted from one point to another. Moreover, the nodes possess a permanent public key that can be used as an identifier and to verify the authenticity of one another. Anytime a node is poised to send a payment to another node, the first thing it is required to do is to build a path via the network by linking payment channels with adequate capacity. Nodes make some information available, including the channels they have opened, the fees they charge for route payments, and the size of every channel.
The routing information can be shared in so many ways and with several protocols are most likely to be created as the Lightning Network Technology keeps advancing. Some Lightning Network executions adopt the IRC protocols not only as an efficient means, but as a convenient mechanism for the nodes to share routing information.
Another LN implementation of route discovery adopts a peer-to-peer model which involves the nodes transmitting channel announcements to their “peers”, in a “flooding model”, akin to how Bitcoin Blockchain transmits transactions.
The lightning Network also employ an onion-rated protocol that is based on a scheme known as sphinx. This protocol allows payment sender to build and communicate a path via the LN such that:
- All intermediate nodes can authenticate and decrypt their part of route information and proceed to finding the next hop.
- Besides the previous and next hops, every node cannot learn about other nodes that forms a part of their path.
- They cannot determine the length of the path of payment, or their position in the path.
- Each portion of the path is encrypted so that a network-level attacker cannot link packets of one part of the path to those of another part.
Every single element of the path possesses information about the Hash Time Lock Contracts (HTLC) that must extend to the next hop, the amount of fee to include, and the expiration of the HTLC, and the amount to be sent.
Benefits of Lightning Networks
The Lightning network, as mentioned earlier, serves as a second layer that can be applied to any block chain that can support some few basic capabilities, including multisignature transactions, time locks, and basic smart contracts.
Furthermore, the effect of Lightning Network can be seen in the high levelof security that are associated with trading Bitcoin. An example of a tool that enables fast and secure trading is BitQT. Besides this, If a LN is adopted on the Bitcoin Network, the network gains a rapid increase in privacy, regularities, size, speed, and general efficiency. More of these benefits are discussed below:
Privacy
The LN offers much more payment privacy than payments on the Bitcoin Blockchain since they are not public. Even though participants can see payments being propagated, they cannot identify the sender or the recipient.
Speed
When Bitcoin transactions adopt the Lightning Network, each transaction is concluded in milliseconds, instead of minutes – as in the case of the Bitcoin Blockchain – since the Hash Time Lock Contracts are cleared without committing any transaction to a block. This speed ensures the enhancement of efficiency.
Capacity
This is one of the greatest benefits Bitcoin network can derive from the adoption of the Lightning Network as it can increase the capacity of the former by several orders of magnitude. There seems to be no practical upper limit to the amount of payment that can be routed over the LN in a second.
Granularity
The Lightning Network can support payments that are as small as the “Bitcoin dust limit” – probably even smaller. Some suggestions support Satoshi increments.
Fungibility
The Lightning Network ensures that surveillance cannot be associated with the Bitcoin Network, and in the process enhancing the fungibility of the Bitcoin currency.
The Lightning network is a reliable second layer with the capability to improve Bitcoin transactions. The LN has been successfully deployed on tesnet. With so much work being done to implement LN, It seems inevitable that it will be adopted as a routed channel for payment to be used in production.
