Blockchain technology, on which most cryptocurrencies work, is a technological shift that has brought progress not only in the field of cryptocurrencies but also in a much wider field. More or less, everything is known about blockchain technology.
The concept is relatively simple and safe in its very idea – security by design. In short, it’s a system in which each individual transaction is visible to all participants in the chain. At the same time, it isn’t possible to change the record without all other participants noticing and rejecting the illegally changed data.
In addition to all the advantages that blockchain has brought with it, there are also certain disadvantages that make the system less acceptable for certain uses. One of the disadvantages is the relative slowness of the system.
It’s necessary to enter the same data in many places in order to ensure reliability. Enrollment in many different places takes too long for transaction participants who are accustomed to their orders being executed almost instantly. Given the speed of payment, Visa and MasterCard cards are much faster ways to pay with than by paying with Bitcoin.
It’s useful to stress that purchasing cryptocurrencies with credit cards have its speed-related advantages as well. For starters, there’s more than one place to buy Bitcoin with credit card and people usually prefer such a way of purchasing because it’s done instantly. Nevertheless, be aware that many exchanges set significant fees on credit card transactions.
Improving the Bitcoin Network Was Necessary
To that end, the Bitcoin network was improved by introducing the so-called secondary level of payment, or Layer 2. The improvement is called Lightning Network, alluding to the acceleration of the Bitcoin payment system and, in essence, relies on direct bitcoin trading between two participants – peer-to-peer – which is used for micropayments, i.e. trading small amounts.
Practically, it’s about the bitcoin transaction being done immediately, while the entries in the other blocks are made later. For these reasons, only small amounts are allowed so that in case of abuse the damage wouldn’t be large.Of course, the perpetrators would be immediately identified and expelled from the system.
It simply doesn’t pay off for hackers to attack small amounts, risking losing much higher profits as a result. In addition, for small amounts, there’s no bitcoin payment fee, while for larger amounts the fee is significant and much higher than the commissions of the Visa and MasterCard systems. What’s even more interesting is that by using the Lightning Network, we can make many small payments without having to pay a transaction fee.
Obstacles on which the Lightning Network Encountered
The start of the Lightning Network, which was in 2018, wasn’t exactly great. Shortly after being released, the network suffered a hacker attack in which about 200 Lightning nodes were shot down. It was an attack in which the network was unable to provide its services by making a disproportionate number of inquiries in relation to the capacity of the network. The servers that support the network couldn’t respond to too many requests and they stopped working.This kind of attack is known as a Distributed Denial of Service, or DDoS attack.
However, the network recovered and, in 2019, continued to grow. The Lightning Network further developed its own crypto wallet, reaching 10,000 knots. Deficiencies were also discovered during the work, which was soon fixed.
Although the Lightning Network isn’t as stable as many would like, it has brought significant improvements, while expectations are high this year. The Bitcoin system is expected to accelerate as well as transaction prices to fall, which would certainly be a significant improvement. It remains to be seen whether the expectations will be met or not.