Lightning network is one of most exciting developments happening in the bitcoin space right now. It is being regarded as the solution to bitcoin’s biggest problem i.e. scalability. However, as awesome as lightning network is, there are still some challenges for the lightning network that it has to overcome to be useful.
What is Lightning Network?
Lightning network is a peer to peer network that has been developed to serve microtransactions across the bitcoin network in a way that the microtransactions can be settled on the main bitcoin blockchain as an aggregate single transaction. Lightning network makes use of payment channels to facilitate fund transfers between two peers and once both peers are convinced that they don’t want to transfer funds anymore they can settle the channel on the bitcoin blockchain. If a peer has multiple channels, it can also act as a hub between other peers to facilitate payments between them by taking some fees for each payment. Lightning network already has a network of 2,812 nodes and 9,836 channels at the time of writing of this article according to 1ml.com.
Challenges for the Lightning network
While lightning network has been active for quite some time on the bitcoin mainnet and has been doing quite well, there are some challenges for the lightning network that have started to show up.
Routing failures on the lightning network
One of the most troublesome problem for the lightning network has been the routing failures. It is not possible for a user to open a direct channel everytime he wants to spend money on the lightning network which is why it is necessary for the shops to be connected to multiple hubs in order to ensure that a user’s payment can reach their shop via multiple hops.
Liquidity on the lightning network
Maintaining proper liquidity on the lightning network has also been a problem for some nodes on the lightning network. A node needs to know what channels it should keep open and how much liquidity it should have on a channel and if a channel has been open for a time and hasn’t done any transactions, should it close it so that the funds can be committed to some other channel to some other node. It is going to be a pain for custodial wallets to maintain proper liquidity across their userbase.
Proper Security on the lightning network
As the lighting network nodes needs to stay online for sending and receiving payments, it is troublesome having a proper architecture for hot wallet cold wallet system to ensure maximum security for the businesses. Currently all lightning network nodes act as a hot wallet which is going to be a security problem once lightning network starts getting big and nodes start having huge balances.
The User Experience Problem
The cost of educating users has always been associated with every new technology. Since lightning network is a new technology, someone will have to properly educate users about what invoices and channels are, what they can do if a payment fails and how they can convert their off chain coins back to on chain balance. Wallets will need to have a new intuitive interface to help users understand the lightning network.
Lightning network is still in early days and many solutions to the above problems are in development. Let us know if you have tried to use lightning network and have faced any problems in the comments below.