What is the Lightning Network and how will it affect Bitcoin and Litecoin?

There have been rumours going around that Bitcoin will use soon Lightning Network technology, some people believe this will have a negative effect on cryptocurrencies like Litecoin since Bitcoins transaction costs and transaction speed will be reduced drastically.

This post will explain how Bitcoin using Lightning Network technology will affect Litecoin but before I tell you that, we need to understand the Lightning Network itself as well as how Bitcoin and Litecoin function as currencies.

Overview of the Lightning Network

First of all the Lightning Network is not exclusive only to Bitcoin, Litecoin was the first to activate this new technology.

The Lightning Network is a technology upgrade that will potentially allow instant transactions as well as instant micro-transactions, the instant transactions will be powered using smart contracts, yes you heard it, smart contracts will be coming to Bitcoin.

Once the Lightning Network is implemented, Bitcoin’s transaction fees will be drastically reduced and we will have almost instant transactions (at the time of me writing this a Bitcoin transaction takes an average of about 78 minutes).

How Bitcoin functions as a currency

For the people who say Bitcoin can only be used as a store of value due to it’s limited supply, they are forgetting that a Bitcoin is divisible just like a Dollar (USD - $) Euro (EUR - €) or Pound (GBP - £), dollars have cents, euros have cents as well, pounds have pence. You do not need a full dollar to purchase anything, you can use even as little as 1 cent or as much as 1 million dollars, the same principle applies to Bitcoin.

One Bitcoin can be divided into “Satoshis”, there are 100,000,000 satoshi’s (or “sats”) in one Bitcoin and 100 satoshi’s are currently worth about 1 cent (0.00000100 BTC).

Micro-transactions

Right now a Bitcoin transaction will cost you anywhere from $7 to $30 when the blockchain is under heavy load and since 100 Satoshi’s are equal to just over 1 cent, micro-transactions are currently impossible and the Lightning Network aims to change that.

Instant transactions

The Lightning Network won’t require miners to validate transactions (due to smart contracts), the transaction will be carried out offline and the Bitcoin blockchain will record the transaction after it has been completed.

Removing the middlemen (Bitcoin miners) from the process will really make Bitcoin retail ready, you could buy a bar of candy for 10,000 satoshis (about 1 Dollar at the time of me writing this) and the transaction would happen instantly with the fees costing a lot less than than what you paid (maybe a fraction of a cent, this is just a theory based on previous research).

How this will affect Litecoin

Litecoin was the first to implement Lightning Network technology as well as Atomic Swaps which has a similar technology but is used for instantly exchanging Litecoin with other cryptocurrencies.

Lightning Network on the Bitcoin blockchain could actually help Litecoin and other Bitcoin forked cryptocurrencies (yes Litecoin is a fork of Bitcoin), first of all Litecoins Atomic Swap technology will enable Litecoin to be spent anywhere Bitcoin is accepted.

For example imagine if fiat currencies had Atomic Swap technology, that would mean that a British person in New York would not have to exchange his pounds for dollars, he would pay using his pounds (GBP) which would instantly convert to dollars (USD) and vice versa.

Now heres an example using LTC/BTC, lets say you only own Litecoins and come across a small cafe that only accepts Bitcoin, no problem you simply use Atomic Swaps to convert your Litecoins to Bitcoin and then you buy your coffee!

The Lightning Network will really unleash Bitcoins potential as a currency and Bitcoin will not just be used mainly as a store of value, have you noticed that during this year (2017) a lot of big businesses such as Microsoft and Subway started to accept Bitcoin as a payment method? Especially since the Lightning Network rumours started. People are starting to get ready.

Lightning Network will increase Bitcoin adoption worldwide and this will in turn increase Litecoin adoption which can only increase it’s demand and possibly raise it’s value.

I hope you found this post helpful, feel free to check out these useful resources below:

Keep your cryptocurrencies safe and secure with a Ledger hardware wallet.

Buy Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash and Dash from BitPanda if you live anywhere in Europe.

Buy Bitcoin and Ethereum from anywhere in the world using CEX or Coinmama.

Get your favourite cryptocurrencies/altcoins from Binance cryptocurrency exchange. (Note: You need BTC or ETH to buy altcoins).

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Mark Johnson on Quora