Bitcoin lightning network

Bitfury just announced a white paper, in collaboration with Olaoluwa Osuntokun and others from the Lightning Network team, proposing a new algorithmic solution to Lightning Network’s routing problem.

A hybrid routing algorithm is proposed which, according to a press release, ensures that “routes can be found as quickly as possible.” According to the whitepaper the algorithm uses a “proactive update of the node’s routing table,” and a “reactive collection of information based on a routing request,” allowing for connections between any payment channel.

The whitepaper states that the hybrid routing algorithm is compatible with onion, tor like, routing and is trustless: “its operation does not critically rely on presence of trusted parties in the network.”

Using a fog of war like design, the collected information by the routing algorithm “includes channels within a low hop-distance and paths to randomly selected nodes further away… As a result, a node will have a well-illuminated map of its local neighborhood within the network, with random patches of visibility further away enabled by the selection of beacon nodes.”

The press release states that the routing solution allows the Lightning Network to perform 400 transactions per second per payment channel and 100,000 transactions per second for the network overall, with testing ongoing. It further states that the routing algorithm can operate with as many as 100,000 Lightning Network nodes according to simulations.

The white paper highlights two potential, but seemingly small problems. A significant number of Lightning Network nodes need to be online which is not required in Bitcoin, and there is a bootstrapping problem as “a sufficient number of channels with enough value stored in them must be created” first.

Whether there are any other problems will become apparent as the wider community now analyses and reviews the proposals of the whitepaper and any accompanying code. This is a significant step, however, towards a functioning Lightning Network which has been proposed as the ultimate solution to bitcoin’s scalability.

It is not yet clear when it may go operational. There were suggestions that the Lightning Network would be out by June this year or sometime this summer, but that now seems highly unlikely as segwit has not yet begun the activation process, which may take a couple of months depending on miners’ response.

Nonetheless, a working solution to the routing algorithm is a significant advancement, potentially allowing for almost unbounded micropayments, opening new markets and uses for Bitcoin. At 100,000 transactions per second, the network would operate at five times Visa’s capacity, handling almost all of the world’s current transactions.  How that will operate in practice, however, remains to be seen.

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