Imagine you are using cryptocurrency, in specific bitcoin, to purchase an item from the store. While the transaction is secure and legitimate, the time take for it will be a lot slower then other traditional payment methods.
That brings us to one of the main problems of crypto transactions, the speed. Lightning Network (LN), is a decentralized protocol layer added to Bitcoin’s blockchain, which allows users to create a payment channel between any two parties on those extra layers. So how does the LN work?
It uses the smart contract functionality of blockchain to set up minute micro-payments channels. As a result, two people can establish a lightning network between them and carry out transaction which are faster and cheaper.
With news of excel plugin enabling bitcoin transactions via lightning network, the feature is gaining more momentum. So let’s go over the following pros and cons of this feature:
Pros of Lightning Network
- The obvious pro of LN is its speed. With this feature, transactions are way faster than what they are on a normal basis for bitcoin.
- Tiny payments can be made via LN and no matter how small they are, they will be done instantly. With its increasing support for altcoins, users are making more and more diverese transactions via LN.
- The transaction fees of LN is much cheaper than bitcoin’s transaction fees. This makes it a popular choice for people who are looking to make large transactions regularly without burning a hole in their pocket.
- With LN, the transactions are anonymous and encrypted. Only when the payment channels are closed and the balance is paid out to both parties, does the blockchain store any information. This adds an extra layer of security to transactions made on the LN.
Cons of Lightning Network
- One big drawback of the LN is that it does not support payments made offline. This can cause inconvenience to users who might not always have access to the internet.
- LN is not a go to option for large scale payments because it is designed to handle mostly small to medium-sized transactions. Also, if your peer is unresponsive, you have to wait for hours before you have access to your funds again.
- Centralization is a major issues with LN. Some believe that LN might actually encourage centralization in payment hubs, which is quite similar to miner centralization.
- Privacy related issues could potentially crop up since these transactions on LN usually take place off the chain. The transactions are not tracked by the main channel.
Well those are the pros and cons of LN, but all things considered, it serves as a brilliant alternative at this point for bitcoin transactions.