The Bitcoin Lightning Network Upgrade Explained


Bitcoins lightning Network upgrade Possibly the most pivotal moment in bitcoins history as it attempts to implement an upgrade that will allow global scalability with virtually instantaneous transactions at very low transaction fees Before we get into that let’s provide a bit of context by looking at bitcoins Scaling history see during the past six months Bitcoin has become more and more popular as people both buy it and use it as an alternative to traditional Fiat currency the problem with this increased adoption and usage is that Bitcoin network has become congested Drastically slowing down transaction and making transaction fees more and more expensive as we can see here bitcoins average transaction fees go to a high of 55 US dollars per transaction during late December 2017 before starting to reduce leading into February of 2018 this price increase coincided with an increase in the volume of transactions as more and more people were buying Bitcoin during this period this can actually be also correlated with an increase in bitcoins active wallet addresses During his time we also saw bitcoins block size filling up close to one megabyte But we’ll come back to that in a bit You see the other major problem in addition to bitcoins high transaction fees during this period where they slow transaction times? during the month of December 2017 there was a median transaction confirmation time of around 1.7 hours and an average confirmation time around 4.7 outs During January however the meeting time was around three hours with an average time of 16 and a half hours for a single transaction Based on the past few months Bitcoin has become more expensive use and with transaction times also increasing its Utility as an alternative form of currency has drastically dropped so why has this happened Let me explain see the way Bitcoin works is the sender of Bitcoin gets to choose how high they want to set the transaction fee? So long as they’re using a lot that allows this where the higher the fee the high in the priority list the transaction gets Essentially meaning it has a higher chance of getting confirmed faster the actual price are the fees Selves are based on supply and demand which is built into bitcoins protocol design of a free market for block space This is where things get a little complicated see Bitcoin has a maximum block size of one megabyte with Transactions being the data that fills these blocks until it’s confirmed by a miner as we can see on this chart Which is the block size? Over time we can actually see as Bitcoin has grown in popularity over the years the blocks have Started to become more and more filled with data around Mid-2017 is when block started to become full to capacity Bitcoin is also designed to have miners confirm one block every 10 minutes But as you can see here this can actually vary a few minutes either side depending on transaction traffic So essentially bitcoins architecture design has two major constraints on it One being the maximum block size of one megabyte and the other being the block conformation time of around 10 minutes So when transactions increase at a rate beyond bitcoins constraints the remaining transactions go into a large list Called the Bitcoin mempool This is when Bitcoin becomes too slow and too expensive to use and it’s utility drops as a real-world alternative to traditional Currency so this leaves Bitcoin with a major issue If this immutable and decentralized currency is ever going to be used By millions of people around the world one day or how they can happen with high transaction fees and slow transaction times Well there was two options one was to increase the block size to allow more Transactions to be captured and thus confirmed and the other was to decrease the confirmation time from 10 minutes down to a lower number This would essentially allow more blocks to be confirmed in a shorter time This issue has been raised and discussed as early as 2013 with all Bitcoin talk forms containing discussions between forum members and former Bitcoin core developers Such as Gavin Andresen and Peter Todd on increasing the block size limit These early discussions indicated that there was some disagreement between developers on how to scale Bitcoin With arguments against raising the block size limit being greater infrastructure would be required in several years Such as internet connections and hard drive space Because because blockchain size would exponentially increase potentially leading to centralization of mining pools so first of all a couple years to July 2015 which was in Bitcoin improvement proposal 1:01 Was submitted by Gavin Andresen and proposed to increase the block size limit The proposal was to increase the block size limit to a size that would grow over time at a predictable rate The proposal was to increase the block size limit to 8 megabytes in January 2016 and to double the block size approximately every two years With the block size capping and 8.2 gigabytes in the year 2036 Objections to this proposal included the centralization of full nodes and mining as the Internet bandwidth and disk space Requirements would significantly increase over time due to the requirement of more expensive hardware and internet speeds other objections included the centralization of mining in the form of big block attacks where simulations indicated that larger blocks increased the advantage of miners with higher bandwidth connections According to github Bitcoin improvement proposal 1:01 was withdrawn they followed a number of Bitcoin improvement proposals Relating to increasing the block size limit all of which were either kept in drafts Or were rejected the second major constraint Which was the ten-minute block confirmation time? Never really got major support as it was seen as integral to not only keep security on the Bitcoin network But to also keep it as decentralized as possible now this brings us to the activation of segregated witness which was finalized in Bitcoin improvement proposal 1 for 8 in early 2017 Segregated witness or more commonly termed segue was proposed as a soft form essentially meaning an upgrade it could take place without bitcoins protocol having to require a split and This segue upgrade was to include a number of features to Bitcoin under something called malleability fixes These fixes would allow a number of upgrades to Bitcoin, but most importantly would facilitate the implementation of the Lightning Network So what is the Lightning Network? Well the lining network acts as a second layer while bringing in something called payment channels and these payment channels essentially out Transactions to occur off chain without every transaction having to be broadcast to the Bitcoin network So what does this actually mean? Well what it means? Is that the Bitcoin network will be capable of performing essentially? Instantaneous transactions with the out transactions having to wait for a block confirmation it also means that micro payments will be possible Allowing very very small sums of Bitcoin to be transferred at virtually zero cost and lastly the Lightning network will allow Bitcoin to mass scale to virtually an unlimited size in the years to come so why is this such a big deal Well the Lightning network upgrade has been compared to how the internet had to scale see when a transaction occurs on the Bitcoin network No matter how big or small it is broadcast to all connected nodes on the network? And this is analogous to how the internet used to function where Ethernet hubs had to transfer data between Computers the data would be broadcast and replicated out through all other interfaces or ports on the network This greatly limited the internet from mass scaling has became virtually Infeasible for data to be transmitted or broadcast to every participant on the network Network engineers overcame this issue by developing something called unicast where data was able to be routed from its source to its destination Without having to be replicated to every network participant the Lightning Network and its payment channels is being compared to the Internet’s Unicast when nodes will be able to route point-to-point transactions without having to replicate the transaction on every node on the network So essentially the Lightning Network has been compared to the Internet’s tcp/ip Eventually allowing global scalability so the Lightning Network sounds like the ultimate solution to be Queen scaling issue However there have been major objections Bitcoin cash was created in almost 2017 by forking the Bitcoin blockchain after it was announced by bit main as a contingency against bit or 148 Bitcoin cash chose to fork bitcoins blockchain Essentially creating a copy of bitcoins protocol the difference was there was changed parameters such as an adjustable block size limit The minimum being raised to eight megabytes so any nutshell Bitcoin cash decided to keep all future transactions on the ledger without adopting any second layer of chain scaling the creation of Bitcoin cash and Bitcoin Coexisting has created a deep divide between developers users and the community Conspiracies run deep on both sides as to intentions agendas and how Bitcoin should be handled and scaled the fact that Bitcoin is so open-source and Decentralized is largely the reason for this But this is also the reason that Bitcoin is so strong and so resilient All right so with that out of the way. What about the lightning networks development? Where is it up to right now well in early December? 2017 the Lightning Network maenette testing began after a successful trial on the test app developers and enthusiasts alike could start testing the Lightning Network Themselves just a few months since the maintenance has been open for testing the number of nodes running the Lightning Network has started to drastically increase the live Lightning Network main net shows as of today the number of nodes is now at 630 with 1796 payment channels in operation the largest cryptocurrency exchange in the world which is coinbase Is now integrating siguen meaning that once completed the Lightning network will be able to be implemented although? This is likely still some time away with the number of nodes running the Lightning Network Increasing every day and general sentiment becoming more and more optimistic It’s just a matter of time before the Lightning Network starts being implemented all around the world Bitcoins purpose which is to be an alternative medium of exchange and store value will return and it will provide amazing Utility to its users the Lightning network will allow very fast transactions at very low fees while simultaneously Being ready for global adoption One thing’s for sure is I am very optimistic and excited for bitcoins future so that’s it for this video Thanks so much for watching, and I hope you enjoyed if you did likes are always really appreciated And if you have subscribed consider doing so if you want to see future content. My name is Bo Thanks again for watching, and I’ll see you guys in the next one Cheers

41 thoughts on “The Bitcoin Lightning Network Upgrade Explained”

  1. Hi everyone! I hope you like my video on the Lightning Network. Its a little different to my usual format, but I enjoyed making it so I hope you enjoy it too. Cheers, Beau

  2. Im confused….I thought it was digital gold and you guys (bitcoin youtubers) were happy with that. You pushed and promoted the use of Litecoin and ignored other currency coins. Now you want to see BTC  used  as currency.???
    Make up your mind !
    Bitcoin = The bipolar of Crypto.
    Im frusrated as, I own enough bitcoin to give a stuff about my investment…..and im not happy…my beloved coin is mismanaged, it has no clear direction.
    Tired of hearing….."LN some time away"…..

    Meanwhile , Bitcoin Cash is about to implement a system of texting payments on smartphones…..and nobody is talking about it..

  3. As always – professional and well-researched presentation – I appreciate your channel very much – thanks for the valuable contribution you are making to promote informed decision making in the crypto market – keep up the good work and great content

  4. Another awesome vid. My number one favorite crypto channel. Can you do a analyses on iota and your personal thoughts on it please?

  5. **WARNING*** ALL CRYPTO YOUTUBERS, MUST K.Y.C. ALL COINS & TOKENS ICO'S OWNERS AND ADDRESS, IF YOU PUT ANY LINKS TO ANY PLATFORMS YOU MUST KNOW EXACTLY WHERE TO LOCATE THE OWNERS AND DEVELOPERS OF THAT COIN OR TOKEN PLATFORM. JUST INCASE THEY DO A (BITCONNECT MOVE) YOU CAN RECOVER YOUR TEAMS MONEY. (OR JUST TELL YOUR TEAM WERE THERE AT?) AND YOU DON'T HAVE TO BE THE FALL GUY…. you know the new thing now, is not hacking cryptocurrency accounts, its kidnapping crypto's

  6. Why use the non-working Lightning Network that is built on an obsolete crypto currency without value in itself when you can use a fast free modern crypto currency directly?

    Bitcoin mining costs about $16 million per day that is taken from very much needed investments in development of better solutions, so the sooner this thing die, the better for the entire crypto space.

  7. Hi Beau Thanks for doing the research and being able to explain that to us all. Question, So if the lightning network takes transactions off the blockchain network to make it faster to use and lower the cost, how do miners keep track of the actual amount of bitcoin circulating? As I always thought miners not only mined bitcoin but kept a public ledger of what is already out there in the general public? Or am I totally missing something?

  8. However it's still unrealistic for mainstream adoption as the price is unstable and it uses huge amounts of electricity.

    For a crypto to receive wide mainstream use it needs to be one.

    1. Cheap

    2. Fast ideally instant transactions.

    4. Stable in price.

    5. Low energy use

    6. Ideal have extra bells and whistles like smart contracts.

    7. Sorry forgot one important one secure.

  9. beau. My idea to reform all future ICOs. If the ICO has not developed a wallet so that when you purchase your coins, and you do not have a company provided wallet, then no ICO. This should weed out a bunch of ICO's that are unwilling and unable to do the tech to have a wallet for their investors.

  10. When I used Bitcoin Cash the transaction took 4 hours to complete. Bitcoin has never taken that long. I'm not sure how that = fast transactions. Bring on the Lightning Network.

  11. The fastest place to buy/sell bitcoins and other cryptocurrencies at ease which I am currently using is furcoins. com, they are prompt and efficient!

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