The Bitcoin Lightning Network has been in existence for several years now, but the protocol is far from being fully developed. Over the past year, we have again worked hard on the various implementations. What happened to the scalability solution in 2020?
Lightning (LN) is a second layer on top of Bitcoin with which you can pay super fast and cheaply. It is a network of payment channels between nodes. Not familiar with Lightning? Then please read our explanation page first!
1. Bitcoin goes Wumbo
For the adoption of Lightning it is also important that payments between exchanges become possible. However, deposits or withdrawals between exchanges often involve large sums of money, while Lightning has been developed as a solution for micropayments.
With the arrival (and activation) of Wumbo channels, the step for exchanges to embrace Lightning has become smaller. With Wumbo, the payment channels are larger and the limits in terms of maximum sizes of LN payments have also been stretched.
Previously, the limit for a payment channel was 16 million (2^23) satoshi per payment channel. In the meantime (after the introduction of Wumbo) there are already several payment channels of more than 2 BTC (200 million satoshi).
Kraken recently announced that it wants to integrate the Lightning Network in the first half of 2021. Bitfinex is still the only major stock exchange that has already implemented it.
2. Lightning Pool
A big problem for Lightning has always been that it was difficult to get incoming capacity. In November Lightning Labs launched a solution: Pool.
You could see it as a market that sends out a signal when someone asks for liquidity. If you have on-chain Bitcoin left over, you can rent or lease it out, so to speak. That way, people who have a huge need for inbound capacity or liquidity can buy it from the market.
The node(s) operators that offer this Bitcoin and open the channel receive a small fee for this.
3. Multi-Part Payments
Thirdly, in 2020, Multi-Part Payments will also be possible in the various implementations. It started with lnd (the implementation of Lightning Labs) and later followed c-lighting and eclair.
Another name is Multi-Path Payments or Atomic Multi-Path Payments (AMP). The idea originates from 2018 and comes from the founder of Lightning Labs, Conner Fromknecht, and his colleague Olaoluwa Osuntokun.
Usually you pay via the Lightning Network by connecting the Bitcoin Profit receiver and the sender via a network of intermediate nodes, also known as hops. This contact takes place through payment channels, in which a balance of satoshi is stored.
The problem was always that there had to be sufficient liquidity within one channel to be able to route (or: forward) the payment. With MPP, payments can be cut into several parts, allowing them to reach the recipient over several paths and thus via several payment channels.
Evan Kaloudis‘ wallet Zeus was the first app where you can do these MPPs (without having to use the command-line interface). A big step forward when it comes to the user-friendliness of Lightning!
4. MyNode, Umbrel, RaspiBlitz
The fourth development was not so much at protocol level, but just below it. Although you can run the implementations on a Raspberry Pi yourself, a number of solutions have become very popular and offer a total package.
Via MyNode, Umbrel and RaspiBlitz you can very easily run your own node. They bring everything together in an easy interface with multiple tools. Via MyNode you can also access ThunderHub and the RTL wallet is ingrained.
2020 was clearly the year in which these parties made it accessible to run their own node. Would you like to take the first steps? Read this explanation page about own nodes.
Another layer underneath these tools are the wallets. Also in this segment of the Lighnting industry a big step has been taken. Both in terms of non-custodial wallets, fiat-onramps and also ease of use.
Strike: an app from Jack Mallers where you can make fiat payments via Lightning.
Phoenix: a non-custodial wallet without the hassle of payment channels.
Breez: the first iOS non-custodial app.
Zeus and Zap: two wallets to link to your own node.
In addition, there are also numerous custodial Lighnting apps that make it easy to use Lightning. BlueWallet has also taken a big step with lndhub.