Bitcoin Lightning Network to Ease and Speed Up BTC Transactions

Bitcoin Lightning Network to Ease and Speed Up BTC Transactions

Before Understanding about Bitcoin Lightning Network. Bitcoin which uses Blockchain technology should be decomposed into separate layers to have a better understanding of the security and economics of Blockchain design.

On the internet the different layers are:

  • The physical layer: This layer is actually the medium which transports the bits whether it be wireless spectrum, cable fiber, or phone lines.
  • The network layer: This layer is managing the addressing and routing of packets between different physical routers, most commonly IP.
  • The transport layer: This layer is managing the raw connection state, most commonly TCP.
  • The session layer: This layer is managing the higher level connection state, such as HTTP.
  • The application layer: This is the layer where the actual applications live, e.g. Google search, Facebook, etc.

Bitcoin layers are decomposed into Consensus, Mining, Propagation, Semantic and Applications. Bitcoin and Ethereum work at all four layers (consensus + mining + propagation + semantic) simultaneously. They lives at two layers and in two different forms. They are:

  • The mining layer: Bitcoins and Ether are created and are transferred as valid blocks, and are created and added to the ledger. The currency is either created from the network itself, or taken from the transactions contained in the block.
  • The semantic layer: Bitcoins and Ether can be transferred among nodes at the semantic. Here the cryptocurrency is used as a store of value and means of payment.

Bitcoin Lightning Network

In order to make transactions faster, Bitcoin is rolling out the thing called “Lightning Network”, which is a application layer on top of Bitcoin and in which the value can be transported between people. Currently, Bitcoin is that transport layer and also an application layer. This new network is better for making payments. Here the person applying can skip all the application layer stuff and interact with the transport layer directly. Further, Lightning Network is complex but is very secure. It is decentralised than Bitcoin itself. Other networks might opt for less security and more centralization.

Additionally, today, a user has to must open a new Lightning “channel” with another user through a regular blockchain transaction. Once the channel is established, the two users can make as many off-blockchain transactions as they want or are able to with the initial amount of value they put into the channel.

Meanwhile Lightning network is still in the testing phase and there is possibility that it will be upgraded.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

Stay updated with latest news on finance, taxation reforms, stocks, currencies, trading, global markets and many more.

Are you finding it difficult to manage your personal finance? Know your best opportunities of investments and savings with expert analysis and latest updates.

Copyright © 2016 Finance Minutes

You agree to not make actual stock trades based on comments on the site, nor on any techniques presented nor discussed in this site or any other form of information presentation. Finance Minutes will not be held liable for any losses you in occur while trading. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. All information is for educational and informational use only. You agree to consult with a registered investment advisor, prior to making any trading decision of any kind.

To Top