In this week’s edition we remark on how there wasn’t terribly that much to remark about in the world of crypto, and depart from our normal format to focus on bitcoin’s up-and-coming Lightning Network.

The price of BTC has been pretty steady throughout most of the month. Source: bitcoinity.org

Markets Remains Surprisingly Calm, Traders Focused on Looming SEC Decision

The price of bitcoin ended the week relatively flat, with an unexpected tick downward early Monday morning. All in all, price movement has been subtle over the last 30 day period, rarely budging from the $6300 to $6700 range. Traders remain largely on the sidelines, waiting for the latest news to come from the SEC on its decision of whether or not to approve a much anticipated Bitcoin ETF. True to their form, other coins remain stagnant as well, also waiting to see what the leader of the pack does next, with a small handful of exceptions bucking the stagnant trend (QTUM, RVN in a downward fashion and MGO, POLY in an upward one).

Because cryptocurrency news has been relatively light over the past 7 days, this week we are concentrating the gist of today’s Roundup on the Lightning Network, which is seeking to bring scalability to bitcoin in ways never before imagined and represents some of the finest intellectual ingenuity that the cryptocurrency space has to offer.

Bitcoin’s Lightning Network Making Strides

The idea that bitcoin should be able to process transactions “off-chain” is not without controversy, but it seems to be the best solution to the problem of scalability which is inherent to keeping blocks at 1 MB in size. Bitcoin Cash (BCH), which seems to go a little bit more to the wayside every day, attempted to solve this problem by making blocks 8 MB – then 32 MB – in size. This allows for a tremendous amount of transactions to fit in a single block, thereby keeping transaction times from becoming too long. However, if these blocks were to be filled to capacity, this means that its blockchain would grow in size around 32 times faster than that of BTC’s, which at 188 GB, is already pretty unwieldy. If bitcoin were to remain true to its principles of decentralization, then anybody should be able to run a node from their home computer; thus blockchain size vs. scalability is a real problem for the wide-scale adoption of bitcoin.

One of the first solutions to the problem, implemented in an upgrade to Bitcoin Core last year (which the founders of Bitcoin Cash subsequently rejected and caused them to release their own version of bitcoin, BCH), was the introduction of SegWit. By chopping out a little bit of data from each transaction deemed to not be completely necessary for keeping the integrity of the blockchain in tact, the size of each transaction could be reduced, meaning more could fit in each 1 MB block, thus keeping transaction speeds up while simultaneously keeping transaction fees down. On October 7th, the amount of transactions being performed using SegWit-friendly addresses reached its all-time high of 48.23% of all bitcoin transactions. The Bitcoin Network still runs at near full capacity of its 1 MB block limit, though the average time it takes for a transaction to be confirmed remains steady at about 10 minutes, or the length of one block. This means that currently, on average, every bitcoin transaction sent to the network can be confirmed in the next upcoming block, or two blocks maximum.

If the Bitcoin Network wants to continue enjoying 10 minute confirmation times while anticipating a greater degree of worldwide adoption, its going to need another solution, and that’s where the Lightning Network comes in. The original concept of the Lightning Network was developed by blockchain developers Joseph Poon and Thaddeus Dryja in 2015. A few test transactions were performed in December 2017, and by 2018 the network was up and running.

The number of Lightning Network channels has been steadily increasing since its inception. Source: bitcoinvisuals.com

 

Simply put, the Lightning Network is a “second layer payment protocol” for bitcoin, meaning it handles most of its processes “off-chain” and only periodically sends information to the bitcoin blockchain. This means that with enough people running the Lightning Network software and acting as “payment channels,” bitcoin can scale to a near infinite level in size, only having to create blockchain-recorded transactions intermittently. It accomplishes this through the use of smart contracts which help to ensure that bitcoin cannot be misappropriated by any single payment channel.

This means that bitcoin can now be not only faster and easier to accept as a method of payment but that micropayments – traditionally stifled by bitcoin’s burdensome transaction fees – can now be performed as well. For instance, even just a $0.23 fee (as is currently the median bitcoin transaction fee) makes bitcoin an unsuitable means of currency for paying for something like a can of soda or a bus fare. However, if this fee could be reduced to say, 5 cents or less, it could open up a whole new world of doors to what bitcoin could be used to purchase. By hooking up the Lightning Network to a Coca Cola vending machine, this is exactly what one Spanish hardware hacker has managed to accomplish, building a first of its kind prototype to demonstrate the advantages of using the second layer protocol. In another such “proof of concept” demonstration, in Germany, an electric bicycle was hooked up to the Lightning Network as its means of payment for a rental, with the transaction for the rental visibly confirmed almost instantaneously in the video below.

As a demonstration of its portability and ease of use, another bitcoin enthusiast created a Microsoft Excel plugin that allows for the transmission of Lightning Network payments, proving how adaptable it is and usable by those who happen to be around a lot of spreadsheets (which is a vast swath of those involved in finances). The implementation of the Lightning Network is getting even easier with the recent development of submarine swaps, which unlike the classic “atomic swaps” that require the network to be active on both sides of an exchange, only require one side of the transaction to be a Lightning Network participant. Though it is still in its infancy, the Lightning Network may someday become a dominating part of the Bitcoin Network – like SegWit – handling a great deal of its transactions in order to help make bitcoin as easy to use as cash itself. These recent improvements upon its core technology certainly help pave the way for its mass adoption, and accordingly, the mass adoption of bitcoin.

A quick breakdown of some Lightning Network statistics (courtesy of 1ml.com):

Network Capacity: 111.35 BTC

Number of connected nodes: 3,879

Number of payment channels: 11,706

Average node capacity: 0.065 BTC

Median base fee: 1 satoshi

Also in the News

  • Financial giant JP Morgan is releasing their own blockchain product dedicated to bring about trading opportunities to their vast client base.
  • Taiwanese phone manufacturers HTC are launching the first truly crypto-friendly mobile phone, with compartmentalized storage for blockchain-related data, and which can only be purchased using cryptocurrency.
  • Can artificial intelligence benefit from the computational capacity offered by cryptocurrency networks? The answer may be “yes” according to a recent article at Bitcoinist.
  • In a rare move for 2018, a Canadian crypto exchange closes its doors to customers after hackers allegedly make off with $6 million worth of BTC.
  • North Korea is bringing in ill-gotten funds not only from malware scams but apparently also from fraudulent ICOs, according to the Independent U.K.
  • Employment in blockchain-related fields is becoming so lucrative that software engineers in California’s famed Silicon Valley are now exiting for higher paying careers elsewhere, which is pretty hard to imagine considering how awesome the Google campus is, according to movies like The Internship, anyway.
  • In an all-too-often occurrence on Twitter, the account of a celebrity was hacked to promote a (ridiculous) “bitcoin giveaway,” where in order to receive a generous donation of bitcoin all a follower had to do was submit 0.1 bitcoin (or more) to a given address. This time around it was television’s Eva Longoria. The hackers managed to dupe 0.62 BTC ($3,880) from unwitting followers in a mere manner of minutes before Twitter was notified and the posts were deleted.