The second layer bitcoin routing network, Lightning Network (LN), has grown significantly since its official launch just over a year ago. However, despite the optimism it has generated among bitcoiners, it still has significant challenges to overcome to become a true Bitcoin scalability solution.

In this work we share the opinion of some users and developers who have experimented with LN, focusing on the main problems of the network today, potential solutions and future prospects, especially in the medium and long term.

Launched in 2018, the network already has a total of 6,097 public nodes with 24,647 pay channels and a routing capacity of 657.80 BTC, which is equivalent to about 2,386,638 dollars according to current market prices.

LN-10.2.19
Current state of the Lightning Network. Source: 1ML.

The growth is undeniable, but its development has encountered some difficulties. However, the general opinion among the interviewees is clear: the technology is at a very early stage and has all the potential to overcome these problems.

Implementation and design

Although it has been increasingly adapted to the less skilled bitcoiners, the current reality of the network requires users to know some technical elements that can complicate the operation of nodes, channels and even the use of specific wallets for LN.

Programming a node is not easy. Although companies such as Casa or NODL are currently creating easy-to-operate, pre-synchronized nodes with lower technical demands, they are still expanding and the average user still needs to master significant technical knowledge. For Beezy, an LN user and member of Lightning Hood, this can be solved with the creation of light clients such as Neutrino, from Lightning Labs.

You also have companies that create escrow wallet solutions that allow users to access Lightning without running their own node, which is excellent. And once Neutrino is on the main NDL network, you can have the same effect without the escrow portion.

On the other hand, the design of applications to interact with the network must still be improved by focusing on satisfying the user’s needs. The design should serve the user and take advantage of the associations that already exist in similar applications to interact with the main chain of Bitcoin.

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Liquidity

One of the most obvious problems in the current state of the LN is its liquidity. Although the network has reached important levels in terms of routing capacity, not all nodes and channels have the capacity necessary for payments to be effective. In addition, the current design does not allow the pooling of payment channels to increase their capacity.

Remember that the design of this second layer of routing implies that, in order to receive and send payments, you must have an open payment channel with another user, with a fixed amount of bitcoins. But to open these channels, the nodes must be connected to the network, and even in this scenario, not all the channels and nodes have enough liquidity to allow the realization of all the payments they receive. If the user exceeds the capacity of the channel, payment cannot be made.

For a network node to be viable it should have between 5 or 10 open channels, with a minimum capital of 1 million satoshis (0.01btc) each channel, and the channels should not necessarily be sending channels, but should be able to host other channels, for example, reception, opened by other users.

Not all nodes have this capacity or number of channels. This especially affects those users who are just experimenting with LN, programming small channels, which do not have enough capacity to route payments.

In addition, if you are opening a channel with someone where you make frequent payments, you will have to frequently close and reopen a channel with that person to add additional liquidity, which could be costly. Not to mention using services like TOR, given that changing IP causes payment channels to close.

For his problem, Atomic Multipayments (AMP) could be a possible solution, since it is an improvement that will allow the combination of payment channels to increase the routing capacity in a transaction.

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Today if you have 3 channels of 100 satoshis on your side, in total you would have 300 satoshis, but you cannot make a payment of 150 satoshis (….) The solution to this problem is called Atomic Multipayments (AMP). Through AMPs, instead of making each payment using a single channel, we can use several channels. So, going back to our previous example, if we have 3 channels of 100 satoshis, we can make a payment of 150 satoshis using 100 from one channel and 50 from another. Although today Lightning Network is working very well, the difference between the network today and a network with AMP, will be clear and clear. Cases where payments fail will be rare.

Connectivity

Another problematic element is the need for node operators to be online for the creation of payment channels. In this case, the activation of the payment channels depends on the availability of the users who operate the nodes, including assuming that they are trusted nodes.

If you want to send satoshis, you must open a channel with a well-connected node. If not, the invoice payment is not going to be completed due to lack of routes or lack of liquidity on the part of the node to which you have opened the channel or is offline.

But, while the connectivity problem can be a difficulty, it can also be an opportunity to generate a network of trusted nodes, which Beezy classified as routing nodes. In this case, they would be nodes with high uptime, always online, always available and with high liquidity.

In this case, the network would have a secure way of creating and routing payments, while the operators of this type of nodes (be they companies or individuals) would benefit from the collection of commissions and the high traffic of payments through their nodes.

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This group of users will be the backbone of the network. Then you will have more common users who have nodes or light client wallets that will be able to make transactions and use the network without having to be online all the time.

There are other elements that could help this improvement without compromising security. For example, Watchtowers can provide security guarantees to these users while their nodes are offline. The idea is that each user can choose to operate a node or not, be online or not, without this individual decision worsening the operation of the network.

Parting thoughts

These and other challenges are manageable, especially because it is a nascent technology, in full development, and which is being developed with meticulous care. In any case, the challenges it faces are part of its own development, in order to be an efficient solution to Bitcoin’s scalability, but without compromising the operation of its network, and without putting at risk the bitcoins that are routed through it.

In addition, network enhancement expands the cases of bitcoin usage. Instant payments of small units of satoshis such as milisatoshis can encourage the creation of new services, as has already been the case with machines dispensers of candy or soft drink, payment for reading articles or to play a game of chess.

This could put certain altcoins at risk, Beezy suggested, specifically those created as coins within service platforms. With LN you can create the same services using Bitcoin, which would make many useful tokens unnecessary, created for specific payments or operations, further expanding the possibilities of bitcoin as good money.

For now, the community is very active and interested in its development. They recently shared a usage experience in which they passed a satoshis “torch” through a global chain of trust, the #LNTrustChain, which demonstrates the reach and expansion it has had in its first year of operation.

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