The Future of Lightning Network - Key developments to look forward to (1)

Ever since the first white paper was published on Lightning network by Joseph Poon and Thaddeus Dryja in 2015, there have been various phases that we have come across in the testing and development of this technology. The year 2018 has witnessed a fair amount of development and adoption of the Lightning network technology with Blockstream, Lightning Labs, Stellar and Bitcoin launching their lightning network.

The idea behind the lightning network was to eliminate the process of recording each and every transaction on the blockchain network in real time. Lightning network adds another layer (in the form of a ledger) to the blockchain by creating payment channels between the two parties. As there are no intermediaries in the process, transactions through the lightning network are instant and low cost or negligible.

Since this technology is developed at a basic level, it has to be improved to truly become a solution for scalability of the Blockchain network. Some of the Lightning projects currently in development are as follows:

Dual-Funded Channels

Initially, payment channels can only be funded by one of the two parties of a particular payment channel. The funding party needs to make a transaction first then only can the counterparty return payment within that payment channel. The dual-funded channel will let both the users fund a payment channel by depositing coins.

Submarine Swaps

In the lightning network, funds cannot be sent to regular on chain addresses from the payment channels. For transferring the channel funds on the blockchain, the channel first needs to be closed. To overcome this, an implementation called ‘Submarine Swap’ was conceptualized by Lightning Labs CTO Olaoluwa Osuntokun and developed by Alex Bosworth.

In Submarine Swaps, the user needs to send the funds to a middleman or a third person who will then transfer those funds to the corresponding on chain address. Submarine Swaps also work the other way round for on chain funds to be transferred to the lightning payment channel.

Splicing

In a basic lightning network, the channels are started with an opening transaction and the funds cannot be added or deducted in the channel until the channel is closed. In splicing, users can add or remove funds i.e ‘splice in’ and ‘splice out’ respectively, by sending the funds from opening transaction to a replacement opening transaction. This replacement opening transaction works as a medium to keep the channel going without having to close the payment channel. While splicing out, the extra funds are sent to a regular on chain address.

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