While the open ledger system behind bitcoin enables the decentralized nature of the currency, storing information for thousands of transactions on multiple servers each are beyond the current capabilities of the technology. So as the cybercurrency continues to grow, how will the technology behind it advance to make widespread use of bitcoin feasible? Developers Joseph Poon and Thaddeus Dryja have proposed a concept called the Bitcoin Lightning Network as a potential solution. According to Poon,
“I think that it is important to look at the way financial systems work because bitcoin development is replaying the history of money. The Lightning Network has significant similarities with how existing financial systems solve this problem.”
Essentially, the Lightning Network works to allow users to negotiate transactions outside of the open forum and instead posts the bullet points of the transaction to the blockchain after an agreement is reached between users. This will continue the open ledger system while attempting to decrease the amount of data processed by servers. The Lightning solution is contrasted to the solution presented by Coinbase, which processes transactions off of the blockchain. In their white paper Poon and Dryjas state,
“If only two parties care about a transaction, it’s not necessary for all other nodes in the bitcoin network to know about that transaction. It is instead preferable to only have the bare minimum of information on the blockchain.”
The Lightning solution does come with some associated risks. The closed off transaction between peers requires time sensitive pass codes which allow users to access and transfer payments. Poor timing in this type of transaction could allow some users to walk away with money that is not theirs. Malicious users could also potentially overwhelm the system causing mass delays in transaction speeds, therefore throwing off timing for pass codes. Despite these potential problems, some developers see the potential in the Lightning proposal. The shift towards scalability in this model would, however, require the support of the whole bitcoin user community.
Read More – Could the Bitcoin Lightning Network Solve Blockchain Scalability? (Coindesk, Yessi Bello Perez)