Bitcoin has always been the world’s main and most valuable cryptocurrency, and that’s not likely to change any time soon. Still, many people believe that Bitcoin has been in a crisis for quite some time now. Indeed, lately there’s been a lot of complaints from users not only having to wait for several hours until their transaction is confirmed, but also paying exorbitant fees in the process.
The problem here is that Bitcoin’s blockchain is only capable of processing up to 7 transactions per second, which causes delays and increases fees. If Bitcoin is ever to become a widely-adopted payment system, that figure really needs to change.
There have been many potential solutions to this problem, but perhaps the one with the most potential is the Lightning Network. Essentially, the Lightning Network creates an extra layer on top of Bitcoin’s blockchain, enabling fast and cheap transactions which don’t have to be immediately broadcasted to the community.
In short, that extra layer is comprised of two-way user-generated channels enabling users to send money to each other as often as they need to, instantly, with minuscule fees. Of course, there is a lot more to it, so check out our dedicated guide to learn exactly what the Lightning Network offers to the community.
Spoiler: it’s a lot - the Lightning Network was originally designed to solve Bitcoin’s problems, but it seems that a multitude of altcoins have taken a liking to it as well. Some are planning to implement the entire network as it is, while others are working on their own, albeit very similar solutions.
Perhaps technologies like the Lightning Network are the next logical step in the development of cryptocurrencies. Here’s our round-up of various networks’ takes on this latest trend.
Bitcoin and Lightning Network
This has been thoroughly discussed in our previous guide, but here’s what’s happening with the Bitcoin Lightning Network in a nutshell:
The network is still very much in its infancy and it isn’t fully live yet. However, its testnet, which is an alternative environment used for testing - not real world transactions - has been live since December 2017.
The beta-version of the network was launched on Bitcoin’s mainnet on March 15. At the time of writing, just over a month after the launch, the Lightning Network’s node count stands just below 2,000, which is already more than the number of nodes in Bitcoin Cash.
This implementation is called Lightning Daemon (lnd) and it was developed by Lightning Labs. Around the time of the launch, the startup also announced completion of a seed finance round. They’ve raised $2.5 mln, with contributions coming from some of the biggest names in the cryptocurrency industry.
Lightning Labs are not the only startup out there working on the Lightning Network. There are also other implementations being developed by Blockstream, ACINQ and other members of the community.
So, the completely streamlined and user-friendly version of the Bitcoin Lightning Network is yet to be released, but real Bitcoins have been sent and received via all three major implementations of the network, which also proved that all three of them are interoperable.
Lightning specifications have also been published, which enabled developers to begin working on various applications and other implementations of the network. Most importantly, you can actually already download Lightning Network wallets, albeit nearly all of them are beta-versions.
Here’s a list of some Bitcoin Lightning Network wallets that are already available for you to play with and explore the Lightning technology:
HTLC — a web wallet created by Alex Bosworth that enables you to start making payments immediately and without any configuration.
Lightning-app — a desktop wallet developed by Lightning Labs, available for Mac and windows.
Zap — a desktop wallet with a user-friendly interface, designed by Jack Mallers.
Eclair — a mobile wallet for Android devices designed by ACINQ.
Litecoin and Lightning Network
Scalability is a pressing issue for most cryptocurrencies in the market and Litecoin - which on many occasions has been referred to as ‘the silver to Bitcoin’s gold’ - is no exception. Litecoin has always been one of Bitcoin’s direct rivals, attracting users with its $0.40 transaction fee besides everything else.
Obviously, once the Bitcoin Lightning Network goes mainstream, Litecoin’s transaction fees are going to turn from an advantage into a major disadvantage overnight. So, perhaps it’s no surprise that of all the altcoins toying around with an idea of Lightning Network, Litecoin is the closest in terms of progress.
In fact, Lightning Labs’ implementation of the Lightning Network which launched on March 15 went live on both Bitcoin’s and Litecoin’s blockchains.
Moreover, back in November 2017 Lightning Labs announced that their initial test of a cross-blockchain atomic swap of tokens was a success. To put it simply, an atomic swap is a way of instantly exchanging one token for another between their respective blockchains, essentially bypassing cryptocurrency exchanges. Which blockchains was the initial testing done on? Bitcoin and Litecoin.
If everything goes well, the Litecoin Lightning Network is expected to be launched by the Q3 2018. Undoubtedly it will give Litecoin a major push towards mass-adoption. Charlie Lee, the founder of Litecoin, even went as far as to say that Bitcoin’s transactions will still cost users more than Litecoin’s, even with Lightning Network. We’ll just have to wait and see.
Ethereum and Raiden
The Ethereum network is faring better than Bitcoin in terms of the amount of transactions per second it’s able to process. It’s maximum capacity stands at around 20 transactions per second, which is nearly three times more than that of Bitcoin.
However, by its nature, Ethereum’s blockchain is way busier than Bitcoin’s as it not only works as a payment system, but also enables decentralized applications and initial coin offerings (ICOs). The vast majority of ICOs take place on Ethereum, which brings sudden floods of traffic as token sales take place, slowing down the entire network.
So, it only seems natural that such Ethereum will require a scaling solution that is fine-tuned to its needs. Ethereum actually has several different solutions in the works, but one is particularly noteworthy: Raiden.
The concept of Raiden is very similar to that of the Lightning Network: it provides an extra layer outside of the main blockchain where users can create two-way channels to conduct instant, nearly free and safe transactions.
One major difference between the two is that Raiden is ERC20 compatible, which means that every single token issued on Ethereum - and there are hundreds of them - will work with Raiden.
Currently there’s no concrete date set for the mainstream rollout. Raiden was launched on Ethereum’s testnet in September 2017, after which the team behind it held an ICO and raised around $50 mln for further development.
But, in December 2017 a lighter version of the protocol called µRaiden (pronounced “Micro Raiden”) was deployed on the Ethereum mainnet. Essentially, it does the same thing by facilitating instant, trustless - meaning you don’t have to trust or even know the other person - and free transactions.
The difference here is that the main Raiden protocol administers a network of two-way channels, while µRaiden allows someone to open a payment channel that is able to transfer tokens in one direction only. Those are extremely useful for micropayments, like paying for a cup of coffee.
ZCash and BOLT
Lightning Network will make transactions on all-transparent blockchains like Bitcoin a little bit more private, as all the micropayments made via its two-way channels don’t need to be broadcasted to the entire network. Still, the channel’s opening and closure will leave records of both participating parties as well as the initial and final splits of funds.
ZCash is a cryptocurrency network aimed at providing its customers with enhanced privacy and anonymity, so in order to scale their blockchain they had to develop their own solution. ZCash’s proposed extra layer is called ‘BOLT’ and is fully inspired by the Lightning Network.
What BOLT will do differently from the Lightning Network is that it aims to make the transitions performed within a channel unlinkable. It will be able to do so by utilizing two classic cryptography techniques: commitments - which will hide the value of the payment, and signatures - which will allow users to sign for transactions without revealing what exactly is being signed.
Ian Miers and Matthew Green, the two researches behind BOLT, claim that their creation will be able to work on top of any other cryptocurrency, provided it supports the required cryptography primitives. It will be able to work on top of Bitcoin right now, but with certain adjustments. Still, Miers said that it works a lot better on top of an anonymous cryptocurrency like ZCash.
Miers and Green are planning to release a prototype in the near future, but actually incorporating it into a cryptocurrency will take a more time.
Ripple and Lightning Network
The thing with Ripple is, it doesn’t actually need an extra layer to scale, as it was designed to handle a lot of transactions in the first place. According to the project’s website, it already consistently handles 1,500 transactions per second and it can be scaled to match Visa’s throughput.
However, back in August 2017 Ripple along with Bitfury, a full-service blockchain technology company, released a code that integrated Lightning Network into Interledger. Interledger is Ripple’s protocol developed to enable transactions between different blockchains.
Evidently, Ripple isn’t interested in Lightning as a way of extending the network’s capability. Instead, the project adopted it to make use of it’s atomic swap technology and make another step towards compatibility of different cryptocurrencies.
This is an extremely exciting development, as Interledger was already capable of fascinating transactions between not just public blockchains, but also private ones and, most importantly, traditional payment systems like PayPal.
According to Ripple’s CTO Stefan Thompson, the long term goal for the merger of those two technologies is to enable the crypto community to seamlessly trade between different cryptocurrencies as well as send funds to any given blockchain from PayPal, Alipay, bank accounts and vice versa.
Monero and Lightning Network
Monero is another privacy-oriented cryptocurrency, so implementing the Lightning Network as it is probably not going to fully work for them. However, there are plans of adding a second layer to the network, and the team sees Lightning as their preferred option.
All the infrastructure - including multisignature wallets which were added to Monero in September 2017 - for the Lightning Network to work is already there. However, before it can be implemented, the team will need to make some key improvements to the extra-layer in order to retain as much privacy as possible.
Still, it seems that Monero will mostly be focusing on the Lightning Network’s atomic swaps technology, not its scaling capabilities. Less than a month ago, one of the Monero subreddit moderators mentioned that the network has a dynamic block size, and they’ll scale on-chain ‘just sort of because’.
In the meantime, Riccardo Spagni, one of the project’s creators, has recently said that he is working with Litecoin in an effort to incorporate Lightning Network into Monero and make atomic swaps between the two blockchains possible.
Undoubtedly, this will lead to Monero users being able to swap their tokens for any other cryptocurrency utilizing the Lightning Network in the near future.
NEO and Trinity
NEO is very similar to Ethereum in a sense that it provides a blockchain-as-a-service platform, where users can run decentralized applications, execute smart contracts and hold ICOs. So, in the same way, the platform needed a specialized off-chain scaling solution and in keeping with ‘The Matrix’ theme, it’s called Trinity.
Trinity is still in the works, and to be quite honest, there’s no immediate need for it to be released. As it is, NEO can already process about 1,000 transactions per second, which is significantly more than most other cryptocurrencies, but the team is clearly thinking ahead.
Trinity, Raiden and Lightning Network are extremely similar, if not identical in what they do: taking payments away from the main blockchain and into user-generated channels, which in Trinity’s case are called State Channels.
What’s different between the three solutions is the underlying technology, as they need to be applied to three drastically differently designed blockchains.
Stellar and Lightning Network
Stellar is another network on this list that can already process around 1,000 transactions per second and, according the project’s founder Jed McCaleb it can easily scale to a lot more than that.
Still, just several days after Lightning Labs unveiled their beta of the Lightning Network, Stellar announced that they will be integrating it, becoming one of the first platforms to publicly announce integration.
Even though Stellar might not need to extend it’s capabilities just now, McCaleb outlines three major benefits to integrating the Lightning Network: scalability, privacy and interoperability. He also mentioned that even though Stellar can scale easily, Lightning will take it ‘much, much further’.
Moreover, Bitcoin Core contributor and the leading developer of Stellar’s Lightning Network stated that Lightning is the most important protocol happening in the cryptocurrency space right now and that any platform not preparing off-chain scalability solutions is going to “get left in the payment dust”.