At the current moment in time, the Bitcoin network is struggling under a backlog of well over 135,000 unconfirmed transactions that have caused fees to soar. This latest development comes just days after the planned SegWit2x scaling solution was cancelled, leaving larger blocks dead in the water. The current apparent solution to Bitcoin’s scaling problem looks to be the lightning network.
This network is a scale-free solution with low fees that should be able to at least help solve the scalability issue currently faced by Bitcoin. The transaction volume on the network has increased dramatically, but the amount of data that fits in a block remains the same, causing the network to congest. This means that it is starting to take a lot longer than usual – in some cases, up to several hours – for transactions to confirm on the network, causing a plague of high transaction fees.
Bitcoin’s current blocks are limited to 1MB in size, which is not sufficient to cope with the number of transactions taking place. Large quantities of transactions are feeding into the network, but the amount of block space is greatly restricting the amount that Bitcoin can actually process, causing the backlog that is currently being experienced.
The lightning network could be the perfect solution to this problem. It would make use of an intelligent contract script that would open private channels between peers and those they transact with. The transactions would take place on the private channels with only the final outcome being processed on the blockchain itself. In theory, this system makes peer to peer transactions much more efficient, low cost and scale-free.
If the lightning network goes ahead, transaction verifications would be instantaneous. The private channels would be secured by multi-sig and time locks to allow peer to peer transactions to occur instantly and preventing the current excessive waiting times for transactions to confirm.