What Is Lightning Network and Why Should You Care?

Bitcoin’s latest scaling protocol may open the doors to greater crypto adoption


By Alissa Fleck

Among Bitcoin’s chief complaints is its scalability. Or, presumed lack thereof. In short, the network’s limit on block size results in slower-than-desired transaction times and higher confirmation fees.

While a number of solutions to the scalability problem are being explored, the Lightning Network has recently pulled ahead of other contenders.

Almost a year ago, Lightning Labs released a beta version of its software, thanks to $2.5 million in investments from the likes of Twitter CEO Jack Dorsey, Square’s Jacqueline Reses, Charlie Lee and Paypal’s former COO, David Sacks. Soon, Lightning Network will be available on Square’s cash app for mobile payments, according to Dorsey.

But what, exactly, does Lightning do?

Bitcoin’s block-size limit help protect the network from hacks, but it presents certain limitations that get in the way of widespread adoption. And if bitcoin can ever hope to seriously threaten fiat currency, greater use must come first. With Lightning Network, transactions can be run on sidechains, putting less pressure on the mainnet.

In other words, Bitcoin becomes faster without needing to fork or change the core (crypto purists dig this).

Specifically, Lightning adds another layer to the bitcoin blockchain, but one that serves only as a channel between two users with a multisignature wallet. This layer allows for the expedient redistribution of funds between two parties, but all transactions are ultimately broadcast back to the blockchain as a single transaction once the channel is closed. Because of security concerns, only relatively small transactions are likely to be conducted via the Lightning protocol at first.

The crypto community last week raised awareness for Lightning Network with a social media stunt — the Lightning Torch — that saw participants send Bitcoin around the world at unprecedented speeds. Somewhat ironically, this required participants to know — and, ahem, trust — one another to keep the “torch” alight.

Elsewhere, developers, startups and enthusiasts have begun appropriating Lightning to create platforms like the Tippin.me micropayment browser extension or Lndwork, which allows users to be compensated for completing small tasks. (The full list of Lightning projects can be found here.)

As with any new technology, developers warn that Lightning Network will have a learning curve for new implementations, and there’s always the risk of bugs, glitches and malicious attacks. But with heavy-hitters like Jack Dorsey giving their enthusiastic endorsements, Lightning’s chances are looking better than average.

Lightning Network’s white paper can be found here.

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