A Lightning Network fee channel
And once you shut the fee channel, the ultimate settlement of bitcoin every get together has is broadcast to the blockchain, which finalizes your whole transactions.
Closing and settling a Lightning Network fee channel
Now that you understand how the Lightning Network works, how does the Lightning Network slot in with the blockchain?
How Does The Lightning Network Fit With The Bitcoin Blockchain?
Well, as we’ve already mentioned earlier than, the Lightning Network operates individually from the blockchain, however it is nonetheless anchored to it. Lightning Network is the place transactions occur, and the blockchain is the place these transactions are finalized.
So, throughout your month-long journey on the bar, you solely made two precise transfers on the blockchain. The first transaction is once you funded the fee channel with bitcoin to open it, and the second is once you closed the fee channel. But between these two transactions, you can have made an infinite quantity of transfers inside your channel on the Lightning Network.
But by conducting these doubtlessly infinite transactions on the Lightning Network quite than on the blockchain, we reduce the burden on the blockchain, enhance transaction charges for on a regular basis purchases and maintain transaction charges low.
Now, you could be considering that organising a fee channel with the a whole lot of companies that you just patronize might be tedious. But this is the place the Lightning Network actually shines. You don’t want a direct fee channel with somebody so as to pay them. You will pay individuals and companies via middleman channels on the community.
Lightning Network fee. channel routing
Let’s return to our Lightning Network bar instance to illustrate this additional.
Say you carry your pal, Bob, with you to the bar. Bob doesn’t have a fee channel open with the bar, however he does have one with you. Bob can nonetheless pay the bar via your fee channel. This can be like Bob shopping for beers in your tab and paying his invoice to your Venmo.
Lightning Network routing middleman
This is what makes the Lightning Network so scalable. It finds the quickest path between two events to file everybody’s transactions and makes certain everybody will get paid accordingly. So, as a substitute of getting a whole lot of fee channels for each enterprise you patronize, you solely want a couple of, and the community will care for all the pieces else routinely.
So, that’s Bitcoin’s Lightning Network. It combines pace and safety with minimal charges to make Bitcoin scalable to a worldwide viewers and essentially the most environment friendly fee system on this planet.
