– TIMESTAMPS –
0:00 Intro
2:14 Bitcoin Basics
5:18 Lightning Network History
7:49 How it Works Part 1:
11:37 How it Works Part 2:
14:28 Growth & Adoption
17:36 Lightning Network Issues
21:15 Lightning Network Privacy
24:24 Outro
The Bitcoin network can only handle around 7 transactions per second or TPS for short. By contrast, Visa handles around 1700 TPS on any given day, and it can scale up to 65 thousand TPS if need be
Since block speed and block size cannot be changed without compromising speed, the only solution is to, and thatβs to somehow process BTC transactions outside of the Bitcoin network or βoff-chainβ
βLightning Network Historyβ
The Lightning Network has its roots in Bitcoin creator Satoshi Nakamotoβs earliest writings, but its creation is credited to two brilliant developers: Thaddeus Dryja and Joseph Poon
After more than two years of hard work and help from Bitcoin developers like Blockstream, the Lightning Network was completed in February 2018
π¨βπ»How The Lightning Network Works Part 1π¨βπ»
Unlike most layer 2 networks for cryptocurrency, the Lightning Network is not a blockchain. It consists of a series of interconnected payment channels created by two parties on the Bitcoin network
Payment channels are created between two parties when each deposits BTC into a multi-sig wallet. This creates an off-chain protocol that allows them to exchange IOUs of the BTC in the wallet
βHow The Lightning Network Works Part 2β
The Lightning Network can scale because it makes it possible to connect multiple payment channels together. Transactions are automatically routed between connected payment channels using hashed time locks which prevent intermediaries from intercepting the payment
At the time of shooting, there are over 60 thousand Lightning Network payment channels around the world with over 100 million dollars in BTC locked in its multi-sigs
While actual user adoption of the Lightning Network had a slow start, the pace picked up at the start of 2020 when Bitcoin Lightning wallet developer Zap released the now famous Strike app
πLightning Network Issuesπ
Dozens of code vulnerabilities have been found since the Lightning Network launched in 2018, so much so that many still consider it to be in its testing stages even though itβs technically fully operational
That said, the Lightning Networkβs biggest problems are not technical, theyβre structural. These relate to the opportunity cost of keeping a payment channel open, something which is slowly being resolved
πLightning Network Privacyπ
Government authorities in the US have been trying to crack the lightning network because its protocol is designed such that intermediaries cannot see where the transactions they are routing came from nor where theyβre going. This theoretically gives the lightning network Monero-like privacy features.
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π Disclaimer π
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.
