The Bitcoin in its early years face numerous challenges. One being its slow transaction that dismisses its use for large commercial transaction. VISA’s transaction of 17,000 tr/s easily dwarves away Bitcoin’s 7 tr/s.
The handicap is more pronounce when larger and larger amount of transactions are handled through blockchain. Large transactions consume massive computational power to verify the transaction and increases the transaction cost.
The question of debate is whether blockchain security is needed for small value transactions? For example, Mike buys a coca-cola from his neighbourhood store, which costs him S$1.50. The transaction is seen as low risk because the value is insignicant (against the grand scheme of things) and the risk does not warrant it to be verified via the clunky and heavy blockchain network. Would there be a solution to this, rather than reverting to fiat money or credit cards?
The Lightning Network
The lightning network is developed as a 2nd layer on Bitcoin blockchain to enhance its scalibility as a transcation medium. The network opens a channel between two parties, that allows as many transactions in it. Only when the channel closes will the net transaction be recorded in blockchain.
In Mike’s case, he can buy Coca-Cola everyday for the next 2 years in his neighbourhood shop using Bitcoin LN and when decided to move out of town permanently, close it and have the entire 2 years of records verified and recorded in the blockhain.
The network is in its infancy stage and is not ready to be adopted for mainstream purposes
Although there is no transaction value limit, its capability is currently used for small value transaction, which is proven to increase success rate.
Adoption has been on a small scale but increasing trend. According to Cryptoglobe, the amount of LN channel has increase by 16 folds since early 2018 and nearly $1.6M of bitcoin is stored in LN.
I am invested in this technology that has hope in addressing scalibility issue in Bitcoin.
Disclosure: I invested US$1,000 in Bitcoin and Bitcoin market price is US$ 3,100 when this article is written. Any information, commentary, recommendations or statements of opinion provided here are for general information purposes only.