Crypto

Visualizing Bitcoin Lightning Network growth and Taproot upgrade explained

What is Lightning Network? (ELI5)

Lightning Network is a decentralized layer-2 network protocol that uses a native smart contract scripting language to enable instant, almost feeless Bitcoin payments.

On the Lightning Network, both parties to a transaction are required only to have a sufficiently funded open channel on the network. This is done through a single on-chain transaction.

If there is a direct channel open between the parties, the transaction is routed directly and incurs zero fees. Without a direct channel, the transaction is routed through routing nodes.

Whan a transaction passes through a routing node, it is referred to as a “hop”. There are currently 23k nodes on the Lightning Network with 13k nodes having active channels.

Three years ago, Lightning Network was admittedly far from ideal.

[Lightning Network Node Map (March 2018)](https://preview.redd.it/h9ll0z9rwkc71.jpg?width=1200&format=pjpg&auto=webp&s=edced6ed33a975569ae9b8b3dcc44384f15e6079)

But the network has seen exponential growth since, particularly this year. Lightning Network is now nigh-on a fully functional global payments network secured by the Bitcoin blockchain. Lightning wallets have also come a long way and are now very intuitive to use for the average user.

[Lightning Network Node Map (July 2021)](https://preview.redd.it/1auw5sjvwkc71.png?width=1908&format=png&auto=webp&s=84a1dc82fe2271cdd477ce807df238ce3777ab0a)

Network capacity has doubled this year. Likewise, nodes and channels have grown exponentially, reducing the number of hops, channel lifespan and fee incurred for hops through routing nodes.

[Lightning Network channel capacity has doubled this year](https://preview.redd.it/cow6o2aywkc71.png?width=1908&format=png&auto=webp&s=210d68219928c812f896831f6e13221ee24e03c2)

The growth of the Lightning Network has inspired some pretty cool developments this year,

Following the success of the Bitcoin beach project, a pilot for Lightning Network’s viability as MoE, El Salvador has adopted Bitcoin as legal tender.

Other countries like Tonga, Colombia and a few other LatAm countries have expressed interest to follow suit.

Twitter will launch a tipping system on its platform later this year using the Lightning Network.

[1 satoshi sent from Spain to Tokyo today for 0 fees](https://preview.redd.it/gd1odw5qxkc71.png?width=600&format=png&auto=webp&s=5708c16a25dc46e19f9fb52c0ac54cc7aa64cac2)

**Taproot**

Now with Lightning Network’s maturation as an instant, almost feeless, infinitely scalable decentralized global payments network, Bitcoin is shifting focus to its next big milestone, Taproot.

Taproot brings a set of protocols that further enhance Bitcoin’s scalability through even more efficient use of block space by introducing a new type of output – Pay to Taproot (P2TR).

P2TR uses Schnorr signatures, which are more compact than the conventional Elliptic Curve Digital Signing Algorithm (ECDSA) signatures. Schnorr signatures are between 6 and 9 bytes shorter than ECDSA.

An even more exciting aspect of Schnorr signatures is that it enables the aggregation of multiple signatures into a single signature. This opens up infinite possibilities, including being able to execute multi-sigs and L2/sidechain smart contracts as a simple regular transaction on-chain.

It’s a truly game-changing development, as it allows Bitcoin to have smart contract protocols without bloating the blockchain layer.

Taproot also includes optimization for the Lightning Network called Point Time-Locked Contract(PTLC). PTLC replaces Hash Time-Locked Contract(HTLC). PTLC uses adaptor signatures which enhance privacy and security on the Lightning Network, enable escrow contracts in Lightning channels and allow users to retry stuck payments.

[ Curfew cocktail bar in Copenhagen, Denmark accepting its first Lightning payment](https://reddit.com/link/oorim3/video/nvwgc9n9vkc71/player)

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3 Comments

  1. Good post, thx!

    > Twitter will launch a tipping system on its platform later this year using the Lightning Network.

    This is speculation, right? Or are there any sources for that?

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