“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
That is a direct quote from the original Bitcoin paper that was shared by none other than Satoshi Nakamoto.
However, as of late, Bitcoin is only used for payments whenever anyone needs to trade their Bitcoins for another currency or vice versa. It may be used for actual payments but, at the current moment, due to a variety of present issues, this seems unlikely.
Why?
Transaction costs are high while transaction times are slow, and no one can really wait for hours to have a payment transfer completed for them.
Micropayments, which were one of the goals of Bitcoin, seem impossible to achieve due to the same issue.
The most beneficial point of Bitcoin that also works in its favor for now is its high value and incredible reach throughout the world. To those people who are not familiar with cryptocurrencies, the term Bitcoin is cryptocurrency. Those words are interchangeable for a layman.
However, that level of familiarity has come at a price for Bitcoin, which has now been reduced to a savable commodity than the “digital cash” that it was envisioned to be.
That being said, select teams have been working on finding a solution for this problem, a problem which they expect to resolve sooner than later.
One of such solutions that was also recently deployed for initial testing is called the Lightning Network.
About the Lightning Network
The Lightning Network is a proposed improvement for the Bitcoin network, which when developed and deployed completely, will work towards resolving the scalability issues that the network currently faces.
By doing that, it aims to cut transactions times and in turn, their costs.
To summarize its functions, it proposes to work by using payment channels that are pre-funded by users’ agreement.
These transactions are also off the primary blockchain and thus would be able to provide faster transfer times along with lower transaction costs.
If it works, then the Lightning Network could prove to be very beneficial. However, with the recent test deployment of the Lightning Network, a few questions have risen and have been circling around the community.
A few concerns that have been raised
Since the network is currently being updated with development efforts, saying anything on its efficacy will be impetuous and thus these posed concerns can simply be considered as points that the network developers can address during the development phase.
Building upon the notion that the Lightning network works with pre-funded payment channels that still ensure transparency with each user’s own Bitcoin reserve, one of the aspects that is troubling a few members in the community is that the demand for pre-funded channels could be too high on the Lightning network.
To support this claim, they refer to how people might want to fund payment channels all at once, which might make the solution to create another problem of its own, specifically, by not being able to meet the demands of the number of payment channels required.
Another concern that is being highlighted is that people might choose to maintain low balances in the pre-funded payment channels, and then that will cause an issue of the Lightning network payment channels not having enough pre-funded resources to work with.
In addition to the above, the possibility of fluctuation in the funding of these payment channels is also a cause for concern, as the point that is proposed here is that these payment channels might have enough funds to work with one day, only to have low funds in the pipeline the next day that would be insufficient to meet the requirement of a transfer.
One proposed solution for these problems is to have larger payment channels open and sufficiently funded at all times, but for that, the network will require users to meet new kind of contracts and that would present an issue of its own again.
Ideally, these posed concerns can be resolved before the network is fully deployed, otherwise the Lightning network might be more trouble and hassle as opposed to less.
With the growing solutions provided by the likes of Ethereum and other cryptocurrencies, it is not that far-fetched to imagine that those newer counterparts – which ironically were largely inspired by Bitcoin and improved upon its incomparable achievements – might replace Bitcoin, at least for its vision of becoming the primary method of easy payment transfers.
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