Over the past few months, there has been a lot of hype and speculation surrounding the lightning network and its launch. However, California based Lightning Labs have finally launched the beta version of their software (LND), which is aimed at making cryptocurrency transactions faster as well as cheaper. It can now be used for Bitcoin payments.
For over a year, thousands of developers from around the world had been testing the technology. With cryptocurrencies (and especially Bitcoin) gaining mainstream attention due to rapid rise in prices over the past six months, a large number of people had begun to invest in Bitcoins and use them for payments. However, the biggest problem that arose from this rapid adoption of cryptocurrencies was that of the rising cost of transactions.
Not only were transactions getting expensive, but also slower. Bitcoin transaction fees was increasing with every passing day, hitting as much as $50 per transaction at one point in time. While Lightning Network develops, the Segregated Witness (SegWit) technology too, is getting mainstream attention - which also aims at solving issues pertaining to Bitcoin's transaction costs and transaction speed.
The lightning network basically allows users to open a payment channel between each other. The parties involved in the payments process can conduct transactions without having to post complete details on to the Bitcoin. Basically, only the resulting balances are posted on the blockchain and not the full transaction history. It is after all this has been done that transaction fees come into the picture. This reduces the load on the blockchain as well as the transaction fees.
Once it goes into full effect, this will help merchants who wish to accept Bitcoin payments. Micropayments, which were a big problem on the Bitcoin network due to the high fees, will now be possible. So far, a major hurdle for Bitcoin transactions becoming a part of everyday shopping was the fact that they are not suitable for smaller-value purchases. As opposed to the five transactions per second that the Bitcoin blockchain currently offers, this new and improved technology will help it scale up to thousands of transactions per second, going up to a high of 56,000 transactions per second once it goes into full effect.
A testnet version of the lightning network was set up in January of 2017 - and since then, over 4,000 payment channels have been set up. Merchants such as Block & Jerry's (an online ice cream store), have already begun using this technology. Twitter Inc. Chief Executive Officer Jack Dorsey, head of Square Capital Jacqueline Reses and Tesla Inc. investor Bill Lee have contributed to the rise of this Lightning Network technology, helping it raise $2.5 Million in seed funding.
While it is still in a beta phase, it is bound to have a significant impact on the markets as Bitcoin will now be more meaningful in terms of Media outlets reporting on cryptocurrencies have been commenting that the Lightning Network will help 'Make Bitcoin Money Again'.