Lightning Network has been touted as a solution to transaction malleability on Bitcoin blockchain. The second layer, off chain network scaling solution is also being adopted by Litecoin, Ripple and Zcash. Litecoin has followed Bitcoin and implemented a Lightning Network. However there have been some concerns about the future of the digital currency itself.
What is Lightning Network?
Bitcoin has a block size of only 1MB and a block interval of approximately 10 minutes. It was observed in 2017 that microtransactions were responsible for a significant rise in number of pending transactions. This resulted in an increase in transaction fees on Bitcoin network. Thus, it was proposed to move these microtransactions to an off chain network.
The Lightning Network is a closed network of nodes who can transfer funds between them directly without the intervention of the mainchain. Nodes can create a payment channel between them and transfer micropayments at cheaper transaction fees.
Litecoin Lightning Network vs Bitcoin Lightning Network
Any current Lightning Network nodes running ltcd or c-lightning are already capable of handling both Bitcoin and Litecoin transactions. Litecoin is touted as the silver to Bitcoin’s gold. The digital currency is meant to complement Bitcoin rather than rival it. Litecoin can be used for microtransactions at cheaper transaction fees.
There have been concerns about the future of Litecoin. If users can transfer payments on Bitcoin blockchain at lower transaction fee then it could jeopardize the future for Litecoin. Lightning Network is a second layer payment network and it settles transactions outside the mainchain.
Litecoin founder Charlie Lee said, “But some people say Lightning Network on Bitcoin will kill any reason to use Litecoin. If people can do instantaneous transactions on Bitcoin, why would they use Litecoin? My gut feel is that this is not the case. Even with Lightning Network, Bitcoin still cannot service every person in the world.” He stated that Bitcoin Lightning Network would still not be able to withstand volume of future transactions even when utilized to its maximum capacity.
Litecoin Lightning Network
Charlie Lee stated that the transaction fee on Lightning Network may be cheaper than the main Bitcoin blockchain. But it will still be correlated to transaction fees on the mainchain. Any significant rise in fees on the mainchain will also be felt on the Lightning Network. This is where Litecoin helps. Litecoin mainchain already has low transaction fees and hence its Lightning Network will also have relatively lower fee than Bitcoin Lightning Network.
Transactions on the Bitcoin network could be settled over Litecoin Lightning Network and then sent back again on Bitcoin mainchain. Thus users could use Litecoin to transfer funds at cheaper rates. Lightning Network is interoperable. Two Lightning Networks of different main chains can interact with each other. Hence a fund transfer request initiated by two nodes could be completed on Litecoin Lightning Network and then updated to Bitcoin ledger.
It is possible that a Lightning Network built over Litecoin mainnet could also incentivize use of Bitcoin for payment settlements. The Litecoin Lightning Network is also live and being used. However it remains to be seen how Bitcoin Lightning Network affects the digital currency.
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