LN
The Lightning Network (LN) is a "second layer" solution built on top of the Bitcoin (BTC) blockchain. It enables fast, low-cost transactions by creating a network of payment channels.
"The Lightning Network allows Bitcoin users to make numerous transactions off-chain, with the final state of these transactions later being recorded on the Bitcoin blockchain."
The operation of the Lightning Network involves opening a payment channel by committing a transaction on the Bitcoin blockchain. Once the channel is open, unlimited transactions can occur off-chain between the parties. The channel can be closed at any time by either party, resulting in a final transaction on the blockchain.
"Alice and Bob open a payment channel on the Lightning Network. They can now conduct as many transactions as they want between them, without having to wait for blockchain confirmations or pay high transaction fees."
The main costs associated with the Lightning Network are the Bitcoin transaction fees to open and close payment channels. However, once a channel is open, transactions within the channel are fast and have minimal fees.
"While opening and closing a Lightning Network channel incurs Bitcoin transaction fees, the cost of transactions within the channel is significantly lower, making it ideal for frequent, small transactions."
The Lightning Network represents a significant step towards solving Bitcoin's scalability issue. Its adoption and impact on Bitcoin's role in micro-transactions remain to be seen.
"The Lightning Network's potential to enable fast, low-cost Bitcoin transactions could transform the way micro-transactions are conducted, but its widespread adoption is still uncertain."
* All terms and definitions may update as the Cryptionary improves.
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