The Lightning Torch: How the Community United to Teach Jack Dorsey About Feeless, Rapid Off-Chain Transactions
Over the last few weeks, the Lightning Network — Bitcoin’s off-chain scaling protocol — has made waves.
Over the last few weeks, Bitcoin’s (BTC) second-layer scaling protocol, called the Lightning Network (LN), has gained a lot of traction, steadily proving to become a viable solution to BTC’s infamous scalability problem and even potential competitor to American payments giant Visa.
Thanks to the community-driven Twitter experiment called “the Lightning Torch,” the LN has now been co-signed by Jack Dorsey, who says that integrating the protocol on Square’s popular Cash App is a question of “when, not if.” On top of raising awareness, the social media campaign has also shown what the LN technology is ready to offer in real conditions — but also revealed some of its shortcomings.
A brief history of the Lightning Network, an ambitious campaign to tackle Bitcoin’s scalability
The history of the protocol could be traced back to January 2016, when Joseph Poon and Thaddeus Dryja published a white paper dubbed “The Bitcoin Lightning Network: Scalable Off-Chain Instant Payments.” In it, they underpinned Bitcoin’s Achilles Heel — the scalability issue — and compared the cryptocurrency’s capacity to Visa to illustrate their point:
“The payment network Visa achieved 47,000 peak transactions per second (tps) on its network during the 2013 holidays, and currently averages hundreds of millions per day. Currently, Bitcoin supports less than 7 transactions per second with a 1 megabyte block limit.”
Achieving Visa-like volume on the Bitcoin network seemed barely possible, given that handling that kind of bandwidth and storage would require a great amount of computing power. However, Poon and Dryja argued, there is a way to make Bitcoin a feasible alternative to existing payment systems while keeping its signature decentralization and security — and that would be off-chain scaling.
Enter LN, a network of off-chain payment channels, which require almost no fees and allow for fast, seamless transactions that are made on a layer above the actual blockchain.
“With an off chain payment channel you can deposit, for instance, $100 once, and pay network fee for it, and then pay to your favorite shop as many times as you wish, without paying any transaction fees to the network, to the sum of $100,” explains Eyal Shani, a blockchain researcher at consulting group Aykesubir. He added:
“Instead of paying a transaction and sending it to the entire network, you send an encrypted and signed ‘promise’ that you owe that other party, say, $10 out of the $100. Finally, if the paid party needs the money for another purpose, they close the channel by sending the promise to the entire network. Theoretically, you can do millions of transactions for the price of twice the network fee.”
That way, users can conduct numerous transactions outside of the blockchain and then, when they’re done, record them as a single one, hence saving a lot of processing for the ledger. To describe how the channels work in greater detail, Shani makes an analogy with buckets of water, emphasizing one of its main shortcoming along the way:
“When you deposit money on it, you're filling the bucket and then when you spend it, it slowly loses that water. The bucket can also be full, as you can't have too much water in it. Because of this, for example, once you open a LN channel, you cannot receive money right away — your bucket is full, and first you have to spend some. However, based on the fact that you want to transfer (usually) money from A to D, via the channels of B and C along the way
it is a real problem to keep everyone’s channel with enough liquidity (i.e, balance) to make the transfer.”
Although the LN has been designed specifically for Bitcoin’s blockchain, Shani adds, the concept can be performed on other blockchains — for instance, there is the Raiden network created for Ethereum (ETH).
Moreover, as Cointelegraph reported in a more in-depth analysis of the LN, the network is also testing the so-called cross-chain atomic swaps, which are basically transfers of tokens between different blockchains. If properly implemented, this feature could allow to quickly — and with little to no fees — swap any given cryptocurrency to a different one, and hence challenge the use of cryptocurrency exchanges.
The Lightning Torch — from a local flash mob to a powerful movement co-signed by the CEO of Twitter
The Lightning Torch, also known as LN Trust Chain, is a community-driven experiment aimed at raising awareness about the protocol and testing its robustness.
It was launched on Jan. 19, when Twitter user and Bitcoin enthusiast Hodlonaut announced he or she was willing to pass on 100,000 Satoshis (the smallest unit of a Bitcoin) via the LN to the first person who seems reliable. That volunteer would have to add another 10,000 Satoshis and send the whole amount to another person willing to participate, and so on.
The process somewhat resembles the Olympic torch relay, hence the name “the Lightning Torch.” Eventually, the hashtag #LNTrustChain began circulating to ease communication amo