Lightning network

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The lightning network is based on a software protocol built "on top of" the existing blockchain used by bitcoin. It is based on the name of the Lightning Labs, a loosely organized group which is working on the network's development.

Overview

The Lightning Network sits on top of the network as in a sidechain. It consists of a web of channels between multisignature wallets, which are wallets that require more than one signature in order to effect a transaction in or out of the wallet onto a blockchain. In a multisig wallet, transactions between signatories to the wallet are not recorded on the blockchain.[1][2]

On December 6, 2017, three of the attendees at the 2016 Milan meeting announced a successful test of the interoperability of their three distinct implementations of the lightning network protocol. The firms were ACINQ, Blockstream and Lightning Labs.[3] Cointelegraph, an online cryptocurrency magazine, reported on December 24, 2018, that according to data on the website of bitcoinvisuals, a bitcoin statistics reporting service, the lightning network had the capacity to facilitate transactions of almost 500 bitcoins. Cointelegraph also reported that recent growth in the number of channels that connect nodes had pushed the number of unique channels to 14,352 by late December.[4]

On January 19, 2019, an otherwise anonymous bitcoin hodler called Hodlonaut initiated what has become known as the "LN Trust Chain." Hodlonaut initiated the chain with a Twitter announcement that he would transfer on the lightning network 100,000 Satoshis, worth about $3.50 at the time, to the first person he trusted to add 10,000 Satoshis and pass the total on to someone who would add Satoshis and repeat. As of February 5, the chain included transactions by 139 people in 37 countries.[5] Twitter CEO Jack Dorsey was requested by a cryptocurrency commentator, Matt Odell, in a public Tweet to invoice him for 2,860,000 Satoshis (worth about $100) on February 4. Reportedly, Dorsey received the funds and promptly arranged to send on the Satoshis to Elizabeth Stark, the Lightning Labs CEO.[6]

On May 6, 2019, Bluewallet, a bitcoin wallet provider, launched wallet software allowing users to send bitcoin payments over the Lightning Network using Apple Watches. The software is available for download in the Apple iTunes Store. Nuno Coehlo, Head of product development for Bluewallet, noted that both the implementation of bitcoin payments in a smartwatch as well as the lightning network are both highly experimental. Coelho told CoinDesk, “It’s a very early stage industry so we’re trying to figure out how to build this stuff properly.”[7]

Adoption

On May 31, 2019, Bitfinex announced that it planned to launch support for USDT on the Lightning Network.[8]

In June 2019, a Japanese bar called Awabar Fukouka began working with Japanese startup Nayuta on a "field test" for a new payment system on the Lightning Network. The payment system was designed to allow Awabar customers to pay for drinks using bitcoin.[9]

Background

The lightning network was first described in 2015 in a white paper by Joseph Poon and Thaddeus Dryja, whose second chapter's title asserts, "A Network of Micropayment Channels Can Solve Scalability."[10]

In conjunction with their attendance at the "Scaling Bitcoin Milan" conference in October 2016, a group of interested developers met to discuss the further development of a network for bitcoin payments that would address the well-understood problem of transaction scalability. The attendees represented the blockchain firms ACINQ, Amiko Pay, Bcoin/Purse.io, Bitfury, Blockstream, and Lightning Labs. According to the meeting minutes, "[t]he Lightning Network enables a high-volume of transactions on the Bitcoin blockchain, and enables entirely new use cases for Bitcoin such as extremely low-value micropayments and near-instant confirmation."[11]

References