Bitcoin Lightning is mostly a meme used as a retort to people who say "Bitcoin doesn't scale", it's not a long term solution to anything.
It's sad there are so few technically competent people left in the Bitcoin community to point this out, but its true. If Bitcoin had a hard fork to make ZK Rollups possible it would completely obsolete the lightning network (and be good for Bitcoins security budget!).
It's a state channel system, this means users open channels with each other they're then able to send Bitcoin through.
It works by two users co-signing a transaction which puts some BTC into this "channel". They post this transaction to Bitcoin.
Every time one of the users wants to send the other some BTC they re-sign this transaction with the updated amounts they each have, they don't need to post this transaction until everything is settled.
Users can have many channels open with different people.
It can form a payment network by users acting as middlemen from sender to destination (this is secure, the middlemen can't steal funds). For example most lightning wallets have a super node which routes transactions between their users.
Transactions are routed through this payment network via the client figuring out a path of channels between them and their destination
There must be some path of channels with enough liquidity between the sender and the receiver or the transaction can't be sent.
When you want to withdraw your funds from lightning to Bitcoin you can post the latest channel state to the chain.
It's like building the internet by stringing network cables arbitrarily between houses until we're all connected.
All payments have to be routed across channels of arbitrary size across an arbitrary network. It's a subset of the traveling salesman problem that only gets worse as the network increases in size.
It requires a transaction to L1 to open/close a channel. If 1B+ people used it the Bitcoin network itself couldn't cope with that. At 7 TPS Bitcoin can handle a max of 220M transactions per year.
You need enough liquidity in all channels to your destination to send a payment. This is fine for micro transactions but it can't handle $1k+ transactions well.
You have to re-balance channels or they stop working.
You need some sort of watchtower / guardian node to prevent the other person from being able to steal your funds.
Next time someone tells you Lightning is the future of payments, show them this article. Once enough realize it's dead end technology we can hopefully get Bitcoin to introduce decent scaling technology like ZK Rollups.
Bitcoin Lightning is mostly a meme used as a retort to people who say "Bitcoin doesn't scale", it's not a long term solution to anything.
It's sad there are so few technically competent people left in the Bitcoin community to point this out, but its true. If Bitcoin had a hard fork to make ZK Rollups possible it would completely obsolete the lightning network (and be good for Bitcoins security budget!).
It's a state channel system, this means users open channels with each other they're then able to send Bitcoin through.
It works by two users co-signing a transaction which puts some BTC into this "channel". They post this transaction to Bitcoin.
Every time one of the users wants to send the other some BTC they re-sign this transaction with the updated amounts they each have, they don't need to post this transaction until everything is settled.
Users can have many channels open with different people.
It can form a payment network by users acting as middlemen from sender to destination (this is secure, the middlemen can't steal funds). For example most lightning wallets have a super node which routes transactions between their users.
Transactions are routed through this payment network via the client figuring out a path of channels between them and their destination
There must be some path of channels with enough liquidity between the sender and the receiver or the transaction can't be sent.
When you want to withdraw your funds from lightning to Bitcoin you can post the latest channel state to the chain.
It's like building the internet by stringing network cables arbitrarily between houses until we're all connected.
All payments have to be routed across channels of arbitrary size across an arbitrary network. It's a subset of the traveling salesman problem that only gets worse as the network increases in size.
It requires a transaction to L1 to open/close a channel. If 1B+ people used it the Bitcoin network itself couldn't cope with that. At 7 TPS Bitcoin can handle a max of 220M transactions per year.
You need enough liquidity in all channels to your destination to send a payment. This is fine for micro transactions but it can't handle $1k+ transactions well.
You have to re-balance channels or they stop working.
You need some sort of watchtower / guardian node to prevent the other person from being able to steal your funds.
Next time someone tells you Lightning is the future of payments, show them this article. Once enough realize it's dead end technology we can hopefully get Bitcoin to introduce decent scaling technology like ZK Rollups.
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