Bitcoin Lightning Network — 7 Things You Should Know

1) What’s going on here?

The transaction fees on the Bitcoin network have skyrocketed to new all-time highs of over $30 in the past couple of months, but a new scaling solution might save the day for the digital currency in 2018.

2) What is the Bitcoin Lightning Network?

The Lightning Network is a proposed system built on top of Bitcoin that would let people instantaneously send/receive payments and reduce transaction fees by keeping them off the main network. It helps Bitcoin be more useful as a day to day currency.

3) How does it work?

The Lightning Network is a system of smart contracts built on top of the base Bitcoin blockchain that allows for fast, cheap payments directly between two parties. In order to achieve these fast and cheap transactions, the following steps are taken:

• A multi-signature wallet which holds some amount of bitcoin (provided by at least one of both parties) is set up
• The wallet address is then saved to the public Bitcoin blockchain including a balance sheet (smart contract) that proves how much of this bitcoin deposits belongs to whom
• After this payment channel is set up once, it is possible for…