Category: 6. Building on top of Bitcoin

By enabling the transaction to occur through payment channels rather than on-chain, the lightning network offers a potential way for bitcoin to address its scalability problem. People have likened this to what fiat currency did for gold, arguing that the lightning network could be bitcoin’s ‘killer application’.  The analogy works when you think about it,…

We can illustrate the Lightning Network through a simple example. Bob wants to buy a coffee from a cafe. Bob opens a payment channel with the Cafe and deposits some BTC to create a balance sheet between them.  When Bob buys a coffee the Cafe issues an Invoice via QR code which Bob pay through…

The Lightning Network is an example of Layer 2 bitcoin service. It is an off-chain approach first formally proposed in a paper by Joseph Poon and Thaddeus Dryja in 2015. The technology uses micropayment channels to scale the bitcoin blockchain’s capability by processing transactions more efficiently.  Micropayment channels are opened between two parties looking to conduct a…

The idea of Layer 2 is to build protocols or secondary infrastructure (e.g. the Lightning Network) that can interact with a fundamental base blockchain (Layer 1 e.g Bitcoin) but not be restricted by its scale limitations. This is where we make a clear distinction between on-chain (Layer 1) and off-chain (Layer 2).  Transactions described as…

Learn Crypto tries as much as possible to explain concepts in simple language, but reading the headline of this article, you might feel that we’re failing in our mission. If you’ve followed this section on the Basics of Crypto sequentially you’ll know that Bitcoin is a new form of internet money which is digitally scarce.…

What you’ll learn: Revisiting the Blockchain Trilemma Understanding the crypto ecosystem in terms of layers What problem the Lightning Network solves The future of the Lightning Network