By
Bena Ilyas
April 25th, 2024
3 transactions per second – that is the current capacity of Bitcoin. The price of the cryptocurrency is closely tied to its ability to process at least as many transactions as the traditional financial services. The Lightning Network may be the solution, but the mass adoption of this technology is likely to face some problems.
The price of Bitcoin peaked in the end of 2017: it achieved the incredible high of $20,089 on the 17th of December 2017. The average price of the leading cryptocurrency in June 2018 is $6,793. Not that bad for a currency that cost about a dollar 7 years ago, but still far from the Bitcoin frenzy maximum.
The critical factor for the price of Bitcoin is the limitation in the amount of transactions per second. The Visa network can handle over 3,600 transactions every second, while the result of Bitcoin is just 3 transactions per the same period of time. The best result demonstrated is by its closest competitor Ripple which performs 1,500 TPS, which, however, is still far from the stats of the leading financial services corporations. For sure, some projects achieve much more impressive results: for example, BANKEX Plasma is reported to achieve the capacity of 22,000 TPS. But it is too early to talk about the massive adoption of this project as it is still in beta testing.
The solution for this problem may be already found. The Lightning Network, which is not a new name for the crypto community, claims to increase the capacity of Bitcoin to millions and even billions of transactions per second. The mass adoption of this technology can become the milestone for the history of cryptos. However, the things are more complicated than they seem to be.
The obvious merits of the Lightning Network are its high scalability and low cost. The combination of these features seems to be the recipe for the successful future of the crypto sphere. The adoption of this technology may become the most revolutionary change in the Bitcoin’s technological background. However, the radical change represents a big challenge for the crypto community.
The total amount of Bitcoin is limited and every day that is another day closer to the moment when miners have to settle for transaction fees. The mass adoption of the Lightning Network can hurt the well-being of miners as it can reduce the miner fees in the immediate term. The long run perspectives of using the Lightning Network are the faster and cheaper Bitcoin transactions, but the process of adoption is likely to be fraught with difficulties. The Lightning Network is the solution that is badly needed for the prosperity of Bitcoin, but the matter of the temporary decline in miner fees still remains open for the crypto community and may slow down the adoption of the technology. Nevertheless, that is not the only problem.
The Lightning Network has been around for a rather significant amount of time. The Lightning Network co-creator Joseph Poon promised that the functional version would be available in summer 2016. Two years have passed – and the technology still suffers from various bugs. This is not the matter with the developers: the truth is that the Lightning Network is an incredibly complicated mechanism. Bitcoin transactions are close to the traditional cash transactions, while the nature of the Lightning Networks is more like online decentralized credit system. But it looks like developers of the new technology have finally coped with the problems and the stable functional version is almost here.
The Lightning Network may be far from the ideal solution for Bitcoin because of the short term dip in miner fee and the complexity of the system. The development of a perfect solution may be a great appeal, but it can drag on for years or even decades. Meanwhile, the adoption of the Lightning Network is a real chance to bring Bitcoin to real life.