The Lightning Network is a type of payment protocol built on the Bitcoin blockchain. It operates as a peer-to-peer system, utilizing micropayment channels to enhance the blockchain’s scalability and handle transactions more efficiently and cost-effectively.
Some issues the Lightning Network aims to resolve include:
- Delayed transaction confirmations: Higher fee payers get their transactions processed first, causing lower fee users to wait longer.
- High energy consumption: The energy required to propose a block of transactions through a competitive process is immense, making the Bitcoin blockchain costly to use.
- Guaranteeing accurate fund distribution: Smart contracts and multi-signatures are fundamental to the Lightning Network, ensuring that funds sent through channels reach their intended recipients.
The Lightning Network enables users to open channels for multiple transactions without waiting for the slower main net to confirm each exchange. Within an open channel, parties can transfer funds as needed. Once the channel is closed, all transactions are sent to the mainnet for confirmation.
