What is the Lightning Network? Layer 2 Explained
The world of blockchain technology and cryptocurrencies is constantly changing and evolving. These changes make the infrastructure backing up these things more viable and allow them to accomplish more. This benefits everyone involved.
One of the most significant recent advances is the Lighting Network. This technology, when used properly, can seriously change the crypto game.
But what is the Lighting Network, and how does it work? Keep reading to find out more about it!
Related: Where Can I Pay With My Bitcoin?
What Is the Lightning Network?
General interest in cryptocurrencies is growing. They are easier to get into than before, and people are starting to really see the benefits. Now, more people are involved in crypto than ever before. This has led to a dramatic increase in the number of crypto transactions that occur.
Unfortunately, this growth comes at a cost. A massive increase in the number of transactions conducted over the blockchain slows the technology down. This problem needs to be addressed to keep crypto running as well as it did when fewer people were involved with it.
In this way, you can view the blockchain like a brick-and-mortar store that has seen an upswing in customers. The store is happy to have these new customers, and the new customers are there because they like the store. However, the store only has one cash register. This single register is swamped with customers, and because of this, everyone’s experience is less enjoyable.
The Lightning Network is an upgrade to the way cryptocurrencies function. It offers a way to conduct blockchain-based transactions easier and with fewer problems. It does this by taking advantage of layer 2 technology.
How Does the Lightning Network Work?
Layer 2 is essentially a way to expand the capabilities of a blockchain. The main blockchain in most blockchain projects already handles a lot of work. As it grows and more users start actively using it, it has to handle more and more work. This increases the system’s stress, leading to negative consequences like increased transaction fees.
However, this work can be split up into layers. While layer 1 handles some of the work, like security and data availability, other work is offloaded to layer 2. In the end, the same amount of work is done, but the way it is split up prevents any one system from being stressed. This also means that everything is completed faster.
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Returning to our metaphor from before, integrating layer 2 technology into the blockchain is similar to providing a busy store with more cash registers. With these, the store is able to go through customers easier. Because of this, everyone has a better experience.
It also helps that the change provided by the Lighting Network is significant. For many cryptocurrencies, only a few transactions can be made with layer 1 each second. Ethereum was previously only capable of handling around 30.
However, layer 2 expands the potential of each transaction. It bundles together a series of hundreds of transactions. These are then all conducted in the same time it took for the blockchain to handle a single transaction previously. This means that layer 2 technology increases the efficiency of the system by hundreds of times.
What Problems Does the Lightning Network Solve?
Blockchain technology is not without its problems. The world of crypto has faced criticism for some of these problems, specifically transaction fees and the environmental impact of the blockchain in general.
Many people currently treat most cryptocurrencies like an investment. However, crypto as a technology was originally designed as a currency. It was meant to be traded between individuals in an easy and secure way so that it could be used for everyday purchases.
Unfortunately, this is not currently the case. From a functional level, crypto is entirely capable of being used like a currency, but high transaction fees prevent people from using most cryptocurrencies in this way. This makes perfect sense, as people don’t want to take a huge monetary hit each time they use their digital wallets. With reduced costs, it may be more realistic to use cryptocurrencies in this way.
Related: Will Cryptocurrency Ever Replace Fiat?
Crypto also has a significant environmental impact. Transactions are driven by a massive amount of processing power from computers. To run computers like this, a large amount of energy is needed.
The Lightning Network tackles both of these problems at once. The way in which the network reduces strain on the transaction process makes the entire process easier. It reduces costs and the amount of energy required.
Because of this, layer 2 technology helps address key problems with crypto as a whole. This helps eliminate some of the criticism crypto faces, which makes it more attractive to new users. This opens the door for even more good things to come to the world of crypto.
Using the Lightning Network
From a user standpoint, using the Lightning Network is essentially the same as the process that took place before the Lightning Network.
First off, you need to find a wallet that uses the Lightning Network and layer 2 technology. Not every wallet currently does this, so you may have to look around to find one. However, once you do, you are all set.
Related: Cryptocurrency’s Potential to Transform Banking Systems
From there, you can simply enjoy the benefits provided by this technology. Most wallets that work with the Lightning Network will offer you all the advantages the network offers.
While searching for a wallet like this, make sure to be on the lookout for problems. Layer 2 technology is safe from a fundamental level, as it relies on the security and safety provided by layer 1. However, if the security and safety provided by layer 1 aren’t great, it won’t be great in layer 2 either. Make sure to watch out for crypto and blockchain technologies that aren’t designed well or that are rushed onto the market.
The Lightning Network and Layer 2
The Lighting Network uses layer 2 technology to improve several aspects of how cryptocurrencies function. With it, trading crypto is easier and cheaper than ever before. Plus, using it is simple! All in all, the Lighting Network is bringing a lot of good into the game.
Cryptocurrency doesn’t just have to be an investment! Make it simpler to use your crypto how you want to. Sign up for Unbanked to get started today!