What is Bitcoin lightning and should I set up a node?
Understanding the Celo blockchain.
At the time of writing, Bitcoin transactions can take over ten minutes and more than €2 per transaction. This makes them impractical for transferring small amounts.
Bitcoin Lightning has emerged as a solution that reduces transaction costs to about 0.1% and a confirmation time of about ten seconds.
Lightning transactions occur in a network that operates in parallel to the Bitcoin blockchain. Anyone with a computer can allocate a portion of their holdings on the Bitcoin blockchain to the Lightning Network and become a node operator. Node operators enter into temporary (smart contract) agreements with other nodes that allow them to track amounts of “virtual Bitcoin” they transfer between each other. Those agreements can be terminated at any point, and the originally allocated Bitcoin is then distributed according to the net amount of virtual Bitcoin transferred between the two nodes. A network of these nodes allows users to transfer virtual Bitcoin to other users, and node operators can charge small fees for the service they provide.
I have now launched a guide for those interested in learning about the Lightning Network and how you can participate as a node.
Governance Weekly: Understanding Celo
I think Celo is a particularly worthwhile blockchain and protocol to learn about because of its focus on i) a user friendly mobile interface, and ii) providing financial services (think Revolut or Venmo type services) in developing economies.
Blockchains are built to incentivise behaviours that are in the interest of their community. Last week, I took a close look at how Celo incentivises i) those who provide the hardware and software to support the network, ii) those who provide financial collateral to support the security of the network, iii) community members building new projects, and iv) a carbon offset fund. The full article is here.
Questions or requests – you can reach me on Pinotio at Protonmail. Cheers.