You may have read our explanation of the Lightning Network and how it serves to address the scalability issues of Bitcoin. The Lightning Network is a protocol that improves the speed at which Bitcoin transactions are confirmed while lowering transaction fees. Bitcoin’s blockchain averages 7 transactions per second when it comes to processing. Before it can become more popular among retailers and other institutions, this processing speed needs to increase. That’s where the Lightning Network comes in.
But what about many other cryptocurrencies that face similar problems? Bitcoin may have been the first viable digital currency, but it has been joined by so-called altcoin platforms like Ethereum, Litecoin, and Dash. These digital tokens are also striving for mainstream acceptance. Can the Lightning Network also be developed for them? Can it make them more appealing as a means of exchange? Let’s take a look at Lightning Network development for altcoins.
A Brief Look at the Lightning Network and Bitcoin
Before we explore how altcoins are harnessing the power of the Lightning Network, let’s recap the protocol and how it works with the Bitcoin blockchain.
The Lightning Network is a protocol that sits atop the Bitcoin blockchain. Within this framework payment channels can be created between individuals that regularly exchange Bitcoin. Small exchanges can be made within these channels without the need to make changes to the blockchain. Once the payment channel has closed, the entire group of transactions is broadcast to the network. The result is much faster transaction processing.
This technology is still in a beta form which is being tested on the Bitcoin blockchain. There are currently about 2,000 nodes on the Lightning Network for Bitcoin, and this number is expected to grow as the technology is developed by different teams. Lightning Labs, Blockstream, and ACINQ are all working on various applications for the Lightning Network. Specs for the application have been written and published. There are even Lightning Network wallets that you can download and use.
Litecoin and the Lightning Network
Litecoin is often called the silver to Bitcoin’s gold. It was introduced as an alternative to Bitcoin that was designed to offer faster processing and lower transaction fees. Like many altcoins, the hype of Litecoin was somewhat overblown. Still, it remains a popular cryptocurrency for those who want to diversify their crypto portfolio.
The same scaling issues faced by Bitcoin are also challenges for Litecoin to some degree. It only makes sense that Lightning Labs would develop the Lightning Network for Litecoin. Both versions of the protocol went live on the respective blockchains on March 15, 2018.
Litecoin has also served as a sandbox for testing atomic swaps between digital tokens using the Lightning Network. These swaps allow different tokens on different blockchains to be switched instantly. So far the testing has been a success, but there is much work left to do.
The Raiden Network – Ethereum’s Lightning Network Alternative
It is common for one cryptocurrency to seize upon the advances made by another. Ethereum has sought to improve the speed of transaction processing even though it is already vastly superior to Bitcoin. About 20 transactions per second can be processed on the Ethereum blockchain.
One challenge that Ethereum faces that Bitcoin does not is the presence of ICOs that slow down the blockchain. Many new altcoins are built on the Ethereum framework. When these coins offer an initial sale the processing speed of all transactions on the Ethereum blockchain can be affected.
Raiden is the solution that is currently being developed by Ethereum as a Lightning Network alternative. Just like the Lightning Network, Raiden rests atop the Ethereum blockchain so that payment channels can be created. The main difference, however, is that Raiden works with all ERC20 digital tokens. That means that tokens built on the Ethereum framework would also be able to use the protocol to improve their transaction processing.
BOLT for Zcash
The ZCash cryptocurrency is a token that was designed to improve upon the anonymity offered by digital currencies. It has its own blockchain and therefore faces its own scalability issues. The developers of ZCash have started working on their own protocol inspired by the Lightning Network. They are calling it BOLT, and obvious tip of the hat to the original program.
The Lightning Network for the Bitcoin blockchain is set up in such a way that it preserves a record of transactions on the payment channels. These records can be used to determine how much each individual party put in to the payment channel, and it also reveals how the funds were split. BOLT is seeking to eliminate this kind of identifier.
BOLT is designed to use elements of cryptography to obscure the link between transactions made on a payment channel. Commitments and signatures can help to hide the value of transactions and other data which could be linked to the creators of the payment channel. In other respects BOLT works similarly to The Lightning Network.
Ripple and Atomic Swaps
The Ripple cryptocurrency is one that is unique. It doesn’t have the same scaling issues as Bitcoin. Although it is hard to validate, the developers of Ripple claim that the platform can handle about 1,500 transactions per second. That doesn’t put it quite in the league of VISA, but it is much closer than Bitcoin.
It is a unique aspect of Ripple, however, that is finding benefit from the Lightning Network. Ripple has a protocol called Interledger. This protocol is designed to allow different cryptocurrencies to participate in transactions. For example, you could purchase something with Bitcoin and a retailer could provide you with change in the form of Ripple or another token you desire.
We mentioned atomic swaps before as a potential benefit of the Lightning Network. Ripple is seeking a way to integrate the Lightning Network with its Interledger protocol. This would open up the door to multi-currency transactions on different blockchains, and it would provide fast processing for those transactions.
Other Altcoins That Could Use the Lightning Network
Other tokens that are working on applications of the Lightning Network for their own blockchains include:
Many other altcoin projects have taken a wait-and-see approach to the Lightning Network. As the protocol is further developed it could become a standard solution that cryptocurrencies build into their blockchains.
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