The Lightning network is a layer two network for Bitcoin that addresses the issue of Bitcoin's inability to scale.

Many people feel that bitcoin is the future of our financial system, yet scalability is a major impediment. Visa, for example, has 4,000 transactions per second, but Bitcoin has just 7 transactions per second with a current block size of 1 megabyte.

The Bitcoin scalability problem refers to the limited capability of the bitcoin network to handle large amounts of transaction data on its platform in a short span of time. It is related to the fact that records(known as blocks) in the bitcoin blockchain are limited in size and frequency.

So it demonstrates that bitcoin is not scalable, but it does not have to be. The community has come up with the lightning network, the key idea being that small and everyday transactions do not need to be stored on the main blockchain, avoiding several transactions per second. This approach is known as the "off-chain approach."

The developers constructed cryptocurrency layers, with the first layer being the main blockchain and all subsequent layers complementing and adding functionality to the upper layer. A lightning network is a transaction method that allows two parties or bitcoin users to perform transactions with each other that are significantly quicker, less expensive, and easily verified. Lightning is a decentralised network that uses blockchain smart contract capabilities to facilitate immediate payments across a network of members.

This decreases the burden on the blockchain because it only takes two transactions on the blockchain to start and stop the channel, and it is also incredibly secure. Only the most recent signed balance sheet may be used to access the funds under this arrangement. There is no need to create payment channels with everyone in the lightning network because your payment tries to find a route from person A to person B with the fewest number of intermediates and the lowest amount of fees, which reduces strain on the blockchain but requires the intermediaries to have enough money in their payment channels.

How does it function?

The lighting network is reliant on bitcoin's core technology. By leveraging genuine Bitcoin and blockchain transactions and their native smart-contract programming language, it is feasible to construct a secure network of participants capable of transacting at high volume and speed.

"Bidirectional payment channels :" Two parties produce a blockchain ledger record that needs both participants to sign off on any use of funds. Both parties construct transactions that refund the ledger entry to their respective allocations, but they are not broadcast to the blockchain. They can update their individual ledger entry allocations by creating multiple transactions and spending from the current ledger entry output. The most current version is the only one that is legitimate, as enforced by blockchain-parsable smart contract writing. This item can be closed out at any moment by either side broadcasting the most current version to the blockchain, without any tryst . From my point of view lightning network is going to very beneficial in the upcoming years as it helps to solve the problem of scalability of bitcoin as a currency