Why would you need the Lightning Network and how would it benefit Bitcoin as a digital currency?
For a start, we would like to consider the characteristics of Bitcoin, as a global digital currency, allowing everyone anywhere in the world to receive, send and store values without the participation of third parties such as governments or banks.
Bitcoin, as a currency, has several major problems:
1) Payments through Bitcoin could take from several minutes to several hours. The bandwidth of a Bitcoin network is only 7 transactions per second (for example, the Visa payment system has a figure of 65,000 transactions per second).
2) With a high load on the network, paying with Bitcoin can get quite expensive. Each transaction has its own cost (the miner fee), which depends on the load on the network and if the load on the network is high, sending one transaction will be very expensive.
3)It is not profitable to send micropayments as the processing fees are very high. For example, if you want to send a payment of 50 cents, the average commission at the time of creation of this document is 54 cents, and to make the transaction go faster, you will need to pay a commission of 74 cents.
All these problems are solved by the Lightning Network technology – an out-of-network second-level solution that works parallel to the Bitcoin network. If you are interested in technical details
To send Bitcoin to the Lightning Network, you need to create a payment channel, which is an “add-on” that interacts with the Bitcoin blockchain. When you send bitcoin through the Lightning Network, your transaction is not recorded on the main network (on-chain) but takes place at the second level (off-chain), which solves most of the problems of the main system and allows you to make using Bitcoin convenient. Here are the main benefits:
- Transactions are carried out instantly.
- Commissions are completely transparent.
- You can send the even the smallest payment, for instance, 1 cent.
Thanks to the Lightning Network technology, payments in Bitcoin are instantaneous, any person, store or charity foundation can set up a Bitcoin wallet with Lightning Network support, receive and send payments from around the world within a split second!