Lightning Network was touted as a potential solution to bitcoin scaling problem. The second layer, off chain scaling solution would create a new payment channel between two nodes. Any two nodes in Lighting Network could then transfer funds between them as long as the channel was open. It has now been revealed that it has a 100 percent success rate for transactions only up to 3 cents.
Lightning Network Scaling Solution
A study undertaken by Diar has concluded:
“The reliability of successfully routing a payment on the Lightning Network is still quite low, especially for larger amounts. The success rate for a payment for no more than a few dollars between random LN nodes is 70 percent.”
The chances of completing a transaction of over $200 on the Lightning Network is less than 1 percent due to limited capacity of nodes to process payments. Reddit user u/windsok has poked fun of the transaction capabilities of Lightning Network. It is revealed that both nodes in the channel must be online for the transaction to be completed.
One can always transfer bitcoin from one account to another because the digital currency is always stored on the blockchain. It is not required for the receiver to be online for the payment to be successful. But for a transaction to be completed on the Lightning Network both the sender, receiver and the intermediary must be online. A potential solution to this problem would be to create a custodial wallet where nodes can store their digital currencies. This custodial wallet can be with a online wallet provider and thus would be live always. But the creation of a custodial wallet could risk the theme of decentralization.
Bitcoin was suffering from a sudden surge in number of transaction in October and December 2017. Smaller transactions were adding up in the mempool and increasing the transfer fee of the network. Developers decided that micro transactions were responsible for increasing the transfer fee and pending transactions. It was proposed to create an off chain scaling solution on top of bitcoin blockchain. This network would be used to settle micro payments by creating a channel between two nodes. The nodes would complete the transaction and only the final balance would be updated on the ledger.
