Bitcoin’s Lightning Network, Simply Explained!

Many people believe that Bitcoin is the future of the financial system But there is a big problem that prevents Bitcoin from becoming the future, and that is the problem of scalability. Let me give you a chestnut: VISA, the provider of payment services, processes about 4000 transactions per second on average Moreover, it can process up to 65,000 transactions per second Bitcoin is not good, it can only process 7 transactions per second In the case of a block size of 1 megabyte Not thousands of pens per second, but only 7 pens! Obviously, the main blockchain is not very malleable However, it does not require The community came up with a new technology called Lightning Network to solve Malleability problem The central idea is that those smaller, daily transactions do not have to be stored in the main blockchain This avoids the limitation of only 7 transactions per second, so it is also called the off-chain method So how does this method work? Well, let's look at an example.

For example, Bob every morning Buy a cup of coffee on the way to work Recording the purchase of a cup of coffee in the blockchain is really a sledgehammer The transaction fees he paid are likely to exceed the price of this cup of coffee However, with Lightning Network, Bob can form a payment channel with the coffee shop The coffee shop and Bob both put out a portion of Bitcoin as a deposit, Bitcoin calls it a multi-signature address Let’s assume that Bob provides a deposit of 0.05 bitcoins and the coffee shop provides nothing Because they don’t support returns and refunds anyway The so-called multi-signature address is basically like a safe, only when both parties agree to open it To open When the payment channel is opened, we have to make a balance sheet to show the money in this address How to allocate At that moment it said: "Bob can get 0.05 than special, coffee shop can get 0 Bitcoin." It's exactly the same as when they just put down the deposit The action of opening the payment channel will occur on the main blockchain to facilitate transaction transparency The coffee shop owner can see Bob put in a deposit of 0.05 Bitcoin, so he can rest assured to know When the payment channel is closed, they can get the money Now that the payment channel is open, Bob can go and order his breakfast coffee Let's assume that a cup of coffee is worth 0.001 bitcoins To buy this cup of coffee, Bob only needs to modify his balance sheet He subtracted the coffee payment from his own side and added it to the coffee shop Under the name of Hypothesis now, the balance sheet says: "Bob can get 0.045 Bitcoins, and the coffee shop can get 0.005 Bitcoins" Bob and the coffee shop are now going to sign on their new balance sheet with their private seal The balance sheet is in duplicate, each of them has a copy, but they just keep it, but do nothing As long as there is enough money in his name, Bob can continue to use payment channels to order coffee Thousands of transactions between them There is no limit on the number of times, because everything happens outside the main blockchain But it's not all good The payment channel can be unilaterally closed by any of them at any time As long as they put the final balance sheet signed by both parties Announced to the entire Bitcoin network If everything is checked, the miner will confirm that the signatures of both parties are valid Then allocate deposits according to the balance sheet These actions will only create one transaction on Bitcoin's main blockchain Therefore, the Lightning Network can significantly reduce the pressure carried on the main blockchain Only two transactions need to occur on the main blockchain: one to open the payment channel, and another Used to close This method is still very safe The system can ensure that only the last balance sheet signed by both parties can be used for fund release And since it’s a balance sheet signed by both parties, either of them Can decide to take money and leave at any time, regardless of whether the other party is willing to continue to cooperate For example: Bob can’t hold the coffee shop’s money vice versa But not only that You don’t need to open a payment channel for every bitcoin you want to pay You can directly use the Bitcoin network to transfer Bitcoin everywhere This is Alice, he is Bob's friend They have previously traded on Lightning Online, which means that they all have valid access Payment channel Now if Alice wants to buy a cup of coffee Instead of establishing a payment channel directly with the coffee shop, she can transfer the money to Bob, transfer it to the coffee shop Therefore, there is no need to establish payment channels with everyone In the Lightning Network, the money you want to pay will find a payment channel between person A and person B It will try to find a channel that requires the least middleman and the least transaction fees This further reduces the pressure on the main blockchain, but it requires an intermediary Has enough money in the payment channel Well, you now understand that the Lightning Network is a magic horse and how it works, but when will it work? Really use it Uh, the Bitcoin testnet is now undergoing a proof-of-concept We don’t know when the Lightning Network will be available to everyone, but it should be 2018 Well, this video will talk about that If you want to like it, please like it! Circle a fan! Thanks so much for watching! See you in the next video!

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