Wednesday, July 12, Charlie Lee, creator of Litecoin and one of the leading proponents of Bitcoin wrote on Twitter that “Lightning Network will be the ultimate decentralized exchange” and that users will be able to exchange litecoin and bitcoin through the network.

What is Lightning Network?

Lightning Network is the second level Bitcoin scalability solution that enables instant payments between network participants. It requires the creation of a two-way multisig payment channel.

Cryptonomist reported three days ago that the Lightning network is developing exponentially with 9,000 open channels and 57 BTC network capacity, but today this figure has already risen to 71 BTC, which corresponds to $445,000 potentially destined for micropayments.

One of the main aspects of LN is its ability to store transactions locally on the Lightning nodes, created by users, with the possibility of transmitting them on-chain at a later date. The transactions are therefore off-chain, avoiding blockchain congestion, and are only paid when the channel is closed.

The technology is designed to be implemented primarily on Bitcoin but can be extended to other cryptocurrencies.

Atomic Swaps

This interoperability allows the decentralized and trustless exchange of different altcoins that have been formed from the basic Bitcoin code such as, for example, Litecoin, Dogecoin, Zcash and others.

Interoperability is ensured by so-called atomics swaps that link two different blockchains. Where atomic swaps effectively connect blockchains, the Lightning network connects payment channels. And because the underlying mechanics are the same, it is easy to combine the Lightning network with the atomic swaps.

This means that a peer who opens channels on both blockchains could act as a payment processor or an exchange of cryptocurrencies.

Charlie Lee described this process like this:

Users that are running LN on both BTC and LTC can advertise an exchange price and act as a maker earning a spread. Other users can act as a taker and atomically swap LTC/BTC with the maker node via lightning.”

 

The developer, however, believes that it will not be bitcoin to be the main entry point for those who want to make payments via the LN, but expects that litecoin will be the launch pad for this type of technology. This is because opening and financing the channel with bitcoin takes so much time and the commissions are higher than those of litecoin so, Lee thinks that users will prefer to use litecoin to then trade with bitcoin instantly via atomic swaps.

 Litecoin will also be the easiest onramp onto the Lightning Network. BTC takes too long and fees to high? No problem. Open an LTC payment channel on chain cheaply and quickly, then atomically swap for BTC if/when you need to. This can be done in one step using submarine swaps!

A guide for Mac users has recently been released on how to create a Litecoin Lightning Network node directly from the copy-paste commands in the guide.

Future developments

Lightning Network has the potential to be a truly decentralised exchange, similar to those that exist with Ethereum-based tokens. The Atomic Swaps will then allow exchanging cryptocurrencies that implement LN. In the future, efforts will also be made to make Atomic Swaps compatible among several cryptocurrencies, including those based on Ethereum and other blockchains implementing LN.

Currently, there are at least three companies working on the development of LN technology: Lightning Labs, Blockstream and Acinq.

At the same time, work is also being done on the anonymity of transactions which, thanks to the implementation of CoinJoinXT on the Lightning Network, makes it possible to add a layer of privacy to bitcoin.

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Aneta Karbowiak
Graduated in Biology from the University of Genova, she was soon interested in the development of mobile applications and chatbots. She entered the publishing world as manager of an English sports website where she managed a team of ten people. Passionate about blockchain technology and cryptocurrencies, she began writing for Qubithacker.

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