Development and Adoption of Bitcoin Lightning Network is Reaching Critical Mass
With the median bitcoin transaction fee now well into two digits as of mid January 2018, it is becoming increasingly infeasible to continue using the cryptocurrency as anything but a store of value. The Lightning Network is a proposed solution to this scaling problem and functions as an off-chain platform to increase the network throughput of bitcoin beyond 10 transactions per second.
The Lightning Network allows any two bitcoin wallets to create a new “channel” between them for a one-time fee. The fee represents the maximum amount of bitcoin that can be transferred between the two wallets. Eventually, the goal is to create as many of these channels as possible and cover the entirety of the network, meeting the goals of low fees and reduced mempool backlog.
The first ever practical use of bitcoin was in 2010, when two anonymous individuals exchanged 10,000 coins for a pizza on the BitcoinTalk forum. At bitcoin’s current valuation of just over $10,000 in January 2018, that transaction alone represents $100 million. Regardless, given how instrumental that bitcoin pizza purchase was for the cryptocurrency ecosystem, a physical purchase is often a landmark moment for any new digital payment mechanism.
To that effect, on January 20, 2018, a Reddit user announced that he had successfully purchased a physical item using the Lightning Network, a first for the off-chain scaling network. The product in question was an internet router, purchased from the online VPN provider, Torguard. The company began accepting payments through the Lightning Network earlier that month.
According to developers working on the project, the Lightning Network in its current state is still not reliable enough to be widely adopted on the bitcoin mainnet. That, however, is not enough of a deterrent for most early adopters who believe that a lost transaction is a small price to pay for admission.
Proof of concept websites employing the Lightning Network on the bitcoin testnet have also begun popping up in the past few weeks. In order to test the project at these websites, one simply needs to purchase or obtain testnet coins from a faucet. Starblocks, a dummy coffee shop and Thunderdice, a mock gambling platform, both offer the opportunity to experience the Lightning Network’s speed and versatility without any risks.
It is still early days for the Lightning Network since the network’s total capacity hovers at a measly 2.5 BTC at the time of writing this article. As more channels are created and left open, this number is expected to slowly grow as well.
Not everything about the proposed adoption of the Lightning Network is rosy, however. Several arguments have been made against the project claiming everything from a potential rise in centralization to a questionable leadership. Admittedly though, Lightning Network hubs, crucial to the full-fledged functioning of the scaling platform, will need to be licensed as a money transmitter by local authorities, thus reducing the number of individuals that can or will realistically set up a small scale hubs.