A Solution to Blockchain Network Slowness and Inscalability: Lightning Network
The adoption of Blockchain means that more transaction is made; which in turn means the slowdown of the network with increasing number of transactions. In this paradox, the solution comes from the Lightning network. The Lightning Network says that if you want to transfer BTC from a digital wallet to a wallet or cryptocurrency stock, you can decrease the period from minutes or sometimes hours to seconds.
The Bitcoin protocol is designed to take 10 minutes to process each block. The Bitcoin network, which creates 1MB blocks every 10 minutes, can perform up to 7 transfers per second. In addition to the credit card technology that can make 2000 transfer in a second, this system is quite slow, especially due to the increase in demand for BTC transactions, transfers and transactions can be affected by intensity.
The transaction speed increases as the money given to the miner as an incentive for the block process increases. So if you want your transaction to happen quickly, you may need to keep the transaction fee high. The miner selects the transaction with the highest transaction fee among many transactions and processes the block beforehand. The waiting period may take minutes or hours depending on this.
The lightning network transfers coins like Bitcoin, Litecoin and Vertcoin to the miners without paying a fee.
How does LN work?
In this system based on the idea that all operations are recorded in the blockchain, a payment channel is opened on the blockchain. Through this channel, you can make as many transactions as you want between two accounts. On the payment channel, two people have private entry keys and they sign the transaction with these private keys for transaction approval. These private keys, created once for each transaction, are refreshed for each transaction. This payment can remain open for many weeks or years on channels. When you want to close it, the last transaction on the blockchain is carried out without the private key and it is recorded in the blockchain so it is published.
In this system, which is also called bidirectional payment channel, both sides make payments and receive money but do not publish it in Blockchain. If one person (account) has 2 different payment channels, there is also a payment channel among non-affiliated persons. To give an example to explain, if there is a payment channel in between A and B, if there is a payment channel between persons B and C, person A may send a payment to person C through the person B.
The LN payment channel is actually like transferring money to the common pool by stating who owns the money in agreement. Closing a channel means you get the money that belongs to you at the pool. This record is recorded in the blockchain.