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- Bitcoin’s Liquid sidechain to be a major talking point in 2020, compared to the quintessential, yet overhyped Lightning Network.
- The majority of client involvements with Bitcoin include trading or holding onto Bitcoin, rather than making payments.
The Bitcoin Lightning Network, since its conception in 2015 has gained a lot of traction in the Bitcoin community since it helps solve one of the most detrimental problems of the Bitcoin blockchain: network congestion.
The BTC blockchain has traditionally only been able to handle seven transactions per second, and this has been a substantial choking factor to the network.
Bitcoin’s primary goal is to replace traditional forms of currency and payment, but the existing standards like Visa already process 24,000 transactions per second.
Compared to Bitcoin’s transaction rate, it is obvious why a growing audience on the Bitcoin network can end up choking the network and increase transaction fees.
The Lightning Network adds a second layer on top of the Bitcoin blockchain that creates channels between users who want to make quick transactions and then once the transaction is complete.
The channel is closed, the transaction data is written into the blockchain. Since micropayments are more quickly processed due to the direct line between the payee and the payer, this also reduced the transaction fees involved due to less time spent on the block. This second layer peer-to-peer network on top of the BTC blockchain is what makes the Bitcoin Lightning Network.
But this is where the core problem arises:
As much as the Lightning network gains popularity and attention, it isn’t Bitcoin’s biggest problem. On a day to day basis, the majority of client involvements with Bitcoin include trading or holding onto Bitcoin, rather than making payments. So even though the currency’s primary goal is to replace traditional currency, the people are more involved in it to make more money by using its price volatility, general usability, and accessibility.
Even after maturing for nearly ten years, Bitcoin is still primarily used for storing value and trading. This is why it makes more sense for sidechain of the BTC blockchain like Liquid to be a major talking point in 2020, compared to the quintessential, yet overhyped Lightning Network.
Most of the Bitcoin transactions that happen on a day-to-day basis happen between exchanges according to a study conducted by Chainalysis. Since the transactions are just being moved between exchanges (due to user interest in holding coins and trading them), there is no real reason to be actively interacting with the base Bitcoin ledger. Both the Lightning and Liquid networks still have meagre adoption rates even to date.
It is estimated that there is only about 1,500 BTC being transacted in total through these second-layer networks. It is expected that when the upcoming 2020 Bitcoin halving event occurs, there is a good chance that the prices will go up, and the market will become more bullish. These developments will likely cause more traffic to move onto the Liquid sidechain to endure relatively lower transaction fees.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
