Instead, the Lightning Network adds another layer to Bitcoin’s blockchain and enables users to create payment channels between any two parties on that extra layer. These channels can exist for as long as required, and because they’re set up between two people, transactions will be almost instant and the fees will be extremely low or even non-existent.
Even though Lightning Network has been hailed as the solution to Bitcoin’s scalability issue, there are many issues that are holding back the off chain system.
Problems With Lightning Network
While the capacity and the number of nodes as well as channels are increasing steadily, the reliability of successfully routing a payment on the Lightning Network is still quite low, especially for larger amounts. The success rate for a payment for no more than a few dollars between random LN nodes is 70%. The situation is even worse for larger payments. The probability of successfully routing the payment of less than $200 between random LN nodes is a mere 1%.
If Bitcoin can be compared to cash transactions, the Lightning Network is analogous to an online system of decentralized credit: traders exchange IOUs, keep running tabs on their expenses and only use the blockchain when their interaction concludes. That’s a big difference from the sign-and-send procedure for an ordinary, on-chain transaction.
The Lightning Network requires active involvement from all involved. Each party needs to be online at the same time; you can’t just post a QR code on your website to ask for tips. A successful Lightning transaction requires choosing an optimal payment path from among thousands of intermediaries, and—since nodes are constantly flickering on and off—that path needs to be recalculated each time.
Developers have indicated that they are aware of Lightning’s limitations. “Users must understand how the protocol and payment channels work and this involves knowledge from fields like cryptography, security, game theory, economics, and more,” Lightning Labs writes in a blog post, intended to explain the process for lay audiences. “However, as Lightning matures, we’ll be working to improve the Lightning user experience to become more simple, intuitive and familiar.”
The views and opinions expressed in the article Bitcoin’s Second Layer Blockchain Tech, the Lightning Network, Not Ready for Mainstream Use Yet do not reflect that of 48coins.com nor of its originally published source. Article does not constitute financial advice. Proceed with caution and always do your own research.