Bitcoin has a scaling issue, if mass adoption for use as a transnational currency is the plan. With the latest on-chain scaling attempt (Segwit2x) having been aborted, all eyes are on a future Lightening Network implementation.
Often trumpeted as the future of bitcoin, Lightning’s particular twist on payments channels has served as one of the foundational ideas for scaling all public blockchains. By proposing to push transactions off of the bitcoin blockchain, but keeping strong cryptographic guarantees intact, it’s believed by many developers to be the best way to increase the number of transactions the network can handle, reports Coindesk.
But the pressure for Lightning may be on. With bitcoin’s debate over its own scaling roadmap now paused, some businesses, upset by the decision, are watching and waiting to see how Lightning develops. Others are packing bags – threatening to migrate to alternative blockchains with fewer users (and thus less expensive transactions).
On the lightning network, verifications would be instantaneous and concurrent with transactions. Private payment channels secured by multi-sig and and time locks allow transactions between peers to occur instantly. This means that individuals would no longer need to wait excessively long amounts of time for their transaction to be confirmed.
Because private channels operate separately from the Bitcoin network, miners will have fewer transactions to process than they currently do. No longer will every single transaction get posted to the Blockchain; rather, only the final results of transactions between peers will be recorded. This leads to a more efficient use of the data limits on the current Bitcoin network.
A scalable and inexpensive protocol like the lightning network has the ability to entice customers away from traditional financial intermediaries like Visa because of cost savings. Merchants will no longer have to pay exorbitant transaction fees, transportation costs, auditing costs and mediation costs. What’s even better is that your transaction will take place directly between you (party one) and the party you are doing business with (party two) without having to pass through a financial intermediary (third party) who has virtually nothing to do with the actual transaction at hand.
But the longer it takes to implement, the more efficient alt-coins may step in and fill the void. Other altcoins are working on scalability solutions as well; indeed, the ability to scale may well determine the top cryptocurrency a few years from now, reports Cointelegraph. If Bitcoin can’t, then others likely will. Already Ethereum is working on scaling by means of its Raiden Network, which uses payment channels similar to lightning network. Likewise, the digital currency Dash is experimenting with using ultra-large blocks to implement true on-chain scaling. The project just released an update that will increase the size of Dash’s blocks to 2MB when it fully activates, in about a month. This is a horse race for payment utility. Will Bitcoin win? Or will we see a new frontrunner?