Bitcoin has been around for a long time now and it doesn’t look like it is going away anytime soon. Ever since 2013, the cryptocurrency market has exploded into mainstream consciousness. Almost everyone understands how this digital currency works nowadays, or they have a mild awareness at the very least.
Digital currency is used to buy goods and services just like regular legal tender; however, it isn’t overseen by the bank and the government. Instead, these digital transactions are monitored by peers and companies on the stock market; with each part coded with its own security measures.
This means that every transaction can be traced, but also that Bitcoin is immune to the inflation rates of the economy. Although the general public is familiar with this information, there are still more aspects to Bitcoin that are largely ignored. Take, for example, the Lightning Network.
What Is The Bitcoin Lightning Network
The Bitcoin Lightning Network was introduced in 2015 to speed up these cryptocurrency exchanges. The extra security measures put in place with Bitcoin can make some transactions slow, which became a problem for regular Bitcoin users.
The Lightning Network is designed to bypass this problem by creating another layer of transaction security, available for people that are proven to exchange Bitcoin regularly. This network links two parties with Bitcoin and allows them to make exchanges without the additional wait times. As you can see, the Bitcoin Lightning Network is advantageous for those who trust the people they regularly trade Bitcoin with. However, it does seem a little risky.
Is The Bitcoin Lightning Network Safe?
It is hard to make an outright statement about whether or not the Bitcoin Lightning Network is truly safe. Of course, these transactions are designed to bypass certain security protocols, like block chain, to speed up the process. This in itself poses a general risk.
That is why it is imperative that you only make these kinds of transactions between people that you trust who are also on the same network. Any person that experiences fraud using the Bitcoin Lightning Network can easily dish out the same level of fraud in the same breath. Think of it as a kind of mutually assured destruction.
However, if one person chooses to use the Lightning Network and the other trades Bitcoin on the main block chain they can open themselves up to potential security risks. Therefore, this network is safe so long as both parties agree to let their guard down at the same time.
Benefits Of Using The Bitcoin Lightning Network
The main reason why people choose to use the Bitcoin Lightning Network is for the speed advantages. However, there are other benefits to using this system. The first benefit of this system is that it can exchange Bitcoin to other forms of cryptocurrency in real time. The Lightning Network makes all types of digital funds fungible, which means that you can trade across the network without having to first convert your Bitcoin into another currency. Just make a simple transaction, or sell BTC through a site that has integrated the Lightning Network such as Paxful, at the same speeds that you would make a normal transaction with another Bitcoin user.
You do have the same type of safety net that you always do with the Lightning Network, so always ensure that you exchange and sell to people that you trust. Paxful is just one example of a reliable Bitcoin buyer.
Another benefit of the Bitcoin Lightning Network is that the costs of transactions are often lower. This is true of most cryptocurrency, but the speed advantage helps in this case. Think about it for just a second. A business that buys its goods with a credit card, or one that goes overdrawn with their bank to stay afloat is going to suffer charges on top of the goods they have already purchased. With the Bitcoin lightning network, you can immediately send funds without having to wait. This means that there are no further charges, and that bills are settled immediately.
Bitcoin is also free from the economy, which means any crypto holdings that you have are immune to inflation. This can protect you from some potential market crashes in the future.
Drawbacks Of Using The Bitcoin Lightning Network
This article has delved into all of the benefits of using the Bitcoin Lightning Network so it is only fair that it looks at the negatives. So, what are the drawbacks of using this network?
One negative may already be obvious to some of you, and that is the fact that it can be quite limited. To ensure that you are receiving the best level of security protection, you need to trade with another person on the network. Since the lightning network is fairly new it can be quite difficult to find other users. This means that the benefits of such a system cannot be used by everyone at all times.
These limitations can also stretch to the size of the payments made on the server. Unfortunately, the Lightning Network isn’t strong enough to deal with large transactions at present. This means that you can only really make small, and maybe medium, payments at one time. If you want to make a larger transaction, it is best done in instalments. However, this approach does negate some of the speed benefits that make the network so good in the first place.
Bitcoin Future Proofing
The last thing that is relevant enough to discuss about the Bitcoin Lightning Network system is its future proofing capabilities. The idea of cryptocurrency is already designed to put its investors in good stead for the future. Their investments are shielded from whatever happens in our current economy, and many believe that cryptocurrency will eventually become the mainstream method of purchasing goods and services after our current legal tender expires.
Therefore, any innovations made to the cryptocurrency network is only bringing us all closer to the potential future of financial transactions. It may not be the most effective tool now, but the Lightning Network is only going to become stronger with time.