Misconceptions About Bitcoin Lightning Network

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I think the Lightning Network is quite broadly misunderstood. One of the fundamental misunderstandings is that the Lightning Network simply comprises of payment channels. That’s not true. A lot of people think that in order to operate a Lightning Network payment, you must have a payment channel to, for example, the coffee shop where you want to buy a cup of coffee. But if that was the only way the Lightning Network worked, it wouldn’t be very effective. If you had to open a payment channel every time you wanted to make a payment, the cost of the funding transaction and settlement transaction would be huge.

The second misunderstanding is that, in order for the merchants to be paid or the recipients to be paid, they have to close the channel, and there has to be immediate settlement on-chain. In fact, that’s not true either.  First of all, all payments can be routed. That means the Lightning Network isn’t just the payment channels, it’s channels connected to each other. If I want to visit a web site on the internet, I don’t need to open a VPN to that web provider. I can have a connection with someone else on the internet and they will route my packets to the website. As long as there is a path that reaches from my computer to the computer of the provider. That network has some degree of centralization.

With the Lightning Network, if you have the ability to create a path from your node to the person you want to pay, then you can route a payment over that path. Once you open a channel, you don’t have to open a channel with the person you want to pay. You can open a number of channels. I think the best approach for doing that is to let the client do it for you. Autopilot will open channels for you so you don’t need  [to manage it yourself]. It’s in the background. It simply opens channels with as many people as it needs to be well connected, so it can find routes. It also closes channels when it needs to, such as when the other party doesn’t respond.

Finally, once you’ve opened the channel (or several channels) and you can route payments through them, you don’t have to close those channels in order to use the funds that you receive. You can use them to make payments again over the Lightning Network. You don’t have to cash out. You can keep your funds within the Lightning Network. You can also refill channels through a number of different technology options. One of those is essentially to route a payment to yourself, in the inverse direction of the channel you used previously, to shift the balance back towards you. There are a number of other tricks. Mostly these things will be done by the wallets, not manually.

I think there are a lot of misunderstandings about how the Lightning Network works. Some people took those misunderstandings and, with  some very glitzy graphics and high production values, have created this impression that the LN is inherently  prone to centralization, a hub-and-spoke topology. I don’t think that’s true. Of course, we won’t know until we run it. But we’ve already seen a number of people running Lightning nodes on mainnet.

This experiment has just started. I am very hopeful for the future. I think it will be a great addition to the technologies we use in this ecosystem. But if you don’t want to do that and instead you want to use [only] on-chain scaling to do all of your transactions, you can and there are alternatives.  There are a number of alternative chains out there, including Bitcoin Cash (BCH), Litecoin (LTC), Ethereum (ETH), Monero (XMR), Dash, and many others, that you can use to do your transactions. I simply think that we will do better with Lightning on Bitcoin.

Sana Uqaili

Sana Uqaili is a professional content creator and a strategic marketing adviser, who started off as a freelance copywriter and pass time blogger, and ended up offering her services as a full-fledged business in early 2019. Her ghostwriting contributions and digital marketing tactics have enhanced the Google rankings of various publications and corporate websites. Her passion for writing peaked in late 2019, when she started this site called Opinined. In 2020, she also started podcasting from her home during quarantine, and was able to gain great traction on her podcast channel during the global lockdown.

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