Bitcoin rang in this new year with its tenth anniversary,
Bitcoin rang in this new year with its tenth anniversary, a notable feat for a phenomenon which was speculated to fail. Bitcoin promised a decentralized system of finances, where the users are themselves the bank and do not have to depend upon a centralized banking system for transaction processing and verification.
Bitcoin promised faster transaction at a minimal fee, however as the phenomenon gained widespread acceptance and many other altcoins joined the crypto club, the Bitcoin blockchain became significantly slower than many of its counterparts.
In order to address the slow on-chain processing, many solutions have been put forward, however, the best agreed-upon solution came in the form of the lightning network(LN), an off-chain scalability solution where transactions of the Bitcoin blockchain would be taken up on the lightning network and processed off-chain.
The Lightning network is not fully developed and many in the Bitcoin community has predicted that the LN would take off a significant portion of processing once it is completely developed. However, one must note that the off-chain solution cannot make the Bitcoin network scalable enough to compete with the centralized and traditional processing portals like VISA and MasterCard.
The lightning network has the backing of most of the Bitcoin core developers and quite a few Bitcoin enthusiasts but having said that there are plenty who also believe that LN is not a solution at all as it is messy, centralized and quite frustrating to use at this point of time.
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The Criticisms Of Lightning Network
Despite the backing of some of the noted personalities in the crypto space, the lightning network has faced a fair share of criticism as well. The first noticeable criticism came from an unknown contributor to the LN codebase who called it technically flawed. The anonymous contributor did not make assumptions to reach a conclusion but rather pointed out various flaws of the network which could turn out to be a bane in the long run.
The contributor penned down an article and mailed it to some of the notable developers in his mailing list. He specifically pointed out towards the multi-asset conversion on the LN, which he believes is messy. Here is an excerpt from the article,
“The root cause of this significant technical barrier is the use of hashlocked timelocked contracts to route payments. cross-asset exchange nodes on Lightning Network exist, they will be exploited to create risk-free American Call Options. They will find that significant liquidity will be tied up in such American Call Options, and find that they will lose funds especially at times of volatility.”
The lightning network generally locks the funds in an escrow unless the transaction is verified, and the architecture of the network might lead to prolonged locking of many such contracts due to volatile and changing prices.
Another criticism came very recently when an Australian businessman tried using the LN to send salaries to his employees in the Philippines using Bitcoin. However, his experience was frustrating as withdrawing funds is quite complicated and the users need to find an incoming portal on the network as it is not integrated into the network as of now.
The experience was so bad that the business owner who was an avid Bitcoin enthusiast decided to opt out of the crypto game and has decided that he can only be convinced if when the network is completely developed and does not have basic technical problems.
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The Future of The Lightning Network
The bitcoin developer community has bet big on the off-chain solution, and despite its technical flaws, many believe that Lightning network is the only way to scale the Bitcoin network as of now.
The lightning network has the backing of many noted names in the crypto space including Jack Dorsey, the CEO of Twitter. Jack who himself is a big believer of Bitcoin and goes on to say that Bitcoin is the future currency of the internet. His crypto venture, Cash App which also allows for Bitcoin trading and using it as the daily driver. Dorsey has already announced that his Cash app will be Lightning compatible.
Apart from Jack, many crypto exchanges around the globe are either on their way to integrate lightning network or have already done that. Thus, despite the criticism and the issues with the network, it seems LN is the only available scalable solution for the bitcoin.
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Final Thoughts
The Lightning network has been under development for quite some time and it has already shown that it is capable of handling hundreds of transactions off-chain to take the load off the main Bitcoin blockchain. About the technical flaws and issues of centralization, the community being decentralized and open-source can interact with each other to find the flaws and work on it to provide a refined product.
The centralization aspect is kind of inevitable as being an off-chain solution, the chain would have a certain level of centralization to process the transactions faster. The scalability issue on the main Bitcoin network arises due to the decentralization as the architecture of the network has a fixed block time and one cannot exceed that limit, by the sheer nature of the Bitcoin network.
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