Lightning Nomads : The future of Bitcoin Payments!
By: Suraj Beera
Tags: Payments Technology, Lightning Network, Startup, Bitcoin, Cryptocurrency

These amazing friends are connecting hodlers and merchants across the world making the dream of crypto currency a reality via the Lightning network.

Founders of Lightning Nomads: Naser Dashti & Jake Senn

Lightning Nomads mission is to grow a community of Bitcoin merchants that accept payment via the lightning network and consumers who are willing to make purchases with Bitcoin to make Bitcoin a truly global currency.

There is a closely held historical relationship between people participating in the cryptocurrency evolution and digital nomads.

The crypto community is naturally decentralized and distributed across the globe because nationality doesn’t predict who will be attracted to new technology and ways of thinking.

So, as people begin looking for a community of like-minded individuals, they have to push past borders, getting to know people around the world, attending conferences together and sharing knowledge.

The lightning Bitcoin map across the world⚡

Merchant Maps Show You Where to Spend Your Bitcoin: which inturn serves as a network map to Lightning Nomads to expand their gateways

Interactive online maps are the most intuitive way to find anything these days, including merchants that are willing to take your crypto for whatever they sell. And while Google Maps can help you locate a few businesses dealing with cryptocurrencies near you, other platforms are far more specialized.

Coinmap.org is one of them, as its website allows crypto companies to share their coordinates for free. The map displays around 16,000 venues around the world that accept cryptocurrency payments. Users can filter these entries by multiple categories such as shopping, café, food, grocery, lodging, transport, sports, and nightlife. It will also show you ATMs where you can withdraw digital coins.

Bitcoin hotspots across the planet

The Lightning Network is a “layer 2” payment protocol designed to be layered on top of a blockchain-based cryptocurrency such as bitcoin or litecoin. It is intended to enable fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem.

Whether you’re most comfortable contributing time to help expand our network of ⚡ merchants or Sats to help us grow, we need you on our team. All spending will be accounted for supporting our mission. The QR code is a lightning wallet address. Make sure to send donations from a lightning wallet.

Lightning Network: Scalable, Instant Bitcoin/Blockchain Transactions for the Future

Instant Payments. Lightning-fast blockchain payments without worrying about block confirmation times. Security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds.

Scalability. Capable of millions to billions of transactions per second across the network. Capacity blows away legacy payment rails by many orders of magnitude. Attaching payment per action/click is now possible without custodians.

Low Cost. By transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments.

Cross Blockchains. Cross-chain atomic swaps can occur off-chain instantly with heterogeneous blockchain consensus rules. So long as the chains can support the same cryptographic hash function, it is possible to make transactions across blockchains without trust in 3rd party custodians.

How it Works

The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.

Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.

Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.

Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved — but with the blockchain, the result is deterministic.

Watch how common marketers, barbers and tattoo artists use Bitcoin via the lightning network:

A barber from the Lightning Nomads community uses the Lightning network to get his fees in Bitcoin

A tattoo artist from the Lightning Nomads community uses the Lightning network to get his fees in Bitcoin

Bitcoin Coffee via the lightning nomads network

Lightning is the future of Bitcoin: why?

In a nutshell, the lightning network allows participants to transfer bitcoins between one another without any fees using their digital wallets. Payment channels are created between the two users so that they can transact with each other — in other words, off-chain transactions. Lightning network is another layer added to Bitcoin’s blockchain so that it can process micropayments between participants.

The goal of the network was to create channels in which payments could be made between users without any fees or delays. By allowing the transactions to be done off-chain, the processing time and the number of transactions done via the on-chain network would be improved.

An example of workflow of Bitcoin transactions via lightning

It solves Bitcoin’s transaction fee Problem upto a viable extent : How and why?

Lightning Network is often touted as a solution to the problem of bitcoin’s rising transaction fees. Its proponents claim that transaction fees, which is one of the direct consequences of Bitcoin’s clogged network, will come down after the technology takes transactions off the main blockchain. But bitcoin’s congestion is one among several factors that influence its transaction fees. Besides, the cryptocurrency’s fee itself is a large component of the lightning network’s overall costs.

1. Opening and Closing Channel Costs

Specifically, there are two parts to their costs. The first part consists of a fee equivalent to Bitcoin’s transaction charges in order to open and close channels between parties. Although the lightning network allows payments between two parties, an opening transaction or deposit must be made via on-chain. The two parties then can process multiple transactions between each other, but once the bill has been settled, they need to record a closing transaction for the settled amount on the blockchain.

2. Routing Fees

Besides the transaction fees to open and close channels, there is a separate routing fee to transfer payments between channels. Since the fees for the lightning network are quite low, in theory, it should attract more participants. However, if the fees are so low for the routing of payments between nodes, there might not be any incentive for the nodes to facilitate the payments. Also, as businesses adopt the lightning network as a method of payment, they may also charge fees.

This problem contrasts with the approach being taken by other cryptocurrencies to increase their payments business. For example, Dash has free software plug-ins for merchants to download and use. Dash uses masternodes, who must have deposited 1,000 in Dash coins so that they can approve transactions very quickly. The fees for users are approximately two cents per transaction and Dash payments are available at more than 4,000 merchants.

While exchanging funds on the Lightning Network, users pay truly negligible fees. They only have to pay a full network fee when they close the channel.

3. Remaining Online At All Times Makes Nodes Susceptible

Nodes on Bitcoin’s lightning network are required to be online at all times in order to send and receive payments. Since the parties involved in the transaction must be online and they use their private keys to sign in, it’s possible that the coins could be stolen if the computer storing the private keys was compromised. However, cold storage of coins, which is considered the safest method for storing cryptocurrencies, is possible on a lightning network.

4. Offline Transaction Risk

Going offline creates its own set of problems on the Lightning Network. According to Dryja, it is possible for one of the two parties from a payment channel to close the channel and pocket funds while the other is away. This is known as Fraudulent Channel Close. There is a time period to contest the closing of a channel, but a prolonged absence by one of the parties could result in the expiry of that period.

5. Malicious Attacks

Another risk to the network is congestion caused by a malicious attack. If the payment channels become congested, and there’s a malicious hack or attack, the participants may not be able to get their money back fast enough due to the congestion.

According to Dryja, “forced expiration of many transactions may be the greatest systemic risk when using the Lightning Network.”

If a malicious party creates numerous channels and forces them to expire at the same time, which would broadcast to the blockchain, the congestion caused could overwhelm the capacity of the block. A malicious attacker might use the congestion to steal funds from parties who are unable to withdraw their funds due to the congestion.

6. Bitcoin’s Price Fluctuations

The advent of Lightning Network is also supposed to herald Bitcoin’s viability as a medium for daily transactions. Customers are able to open payment channels with businesses or people that they transact with frequently. For example, they can open payment channels with their landlord or favorite e-commerce store and transact using bitcoins.

However, Bitcoin still has ways to go before gaining mainstream traction. The increase in its transaction volumes is largely attributed to a rise in trading volumes. In other words, Bitcoin’s popularity is a double-edged sword since the increased attention garners investment but also attracts more traders increasing the volatility or price fluctuations in the cryptocurrency. The price volatility makes it challenging for companies to use Bitcoin as a method of payment when pricing their products to sell to their customers or to purchase inventory from their suppliers.

Bitcoin Fluctuations in 2021

For example, let’s say a company has to pay an invoice to their supplier of bitcoin. Typically, suppliers give their clients time to pay, such as 30 days. If bitcoin’s price has increased by 10% during the 30 day period, the business has to come up with another 10% worth of fiat currency or another cryptocurrency to convert to Bitcoin and pay the invoice to pay the supplier. This exchange risk exists because the business might be paid by their customers in a fiat currency and not Bitcoin. The exchange risk also exists for consumer transactions since the salary or wages for most individuals are not paid in Bitcoin, leading to transactions being converted from a fiat currency to Bitcoin.

As a result, the overall effect of Lightning Network on reducing Bitcoin’s transaction fees and building scale may be limited since the crypto has yet to be adopted as a method of payment.

The Future of Bitcoin’s Lightning Network

There remain challenges with Bitcoin’s Lightning Network and its ability to boost scale while simultaneously lowering transaction fees. However, the technology’s core team has incorporated new use cases and has been researching additional features. As a result, there have been significant developments that are due to improve the network in 2021 and beyond.

Larger Payments via Lightning Network

Lightning had initially limited channel size to a maximum of 0.1677 BTC but in 2020, it was announced that the constraints will be removed so that clients can have larger channels. These “Wumbo” channels are designed to increase the usage and utility of Lightning Network for consumers and businesses.

Larger payments too can be processed via lighting networ

Crypto Exchanges

One of the most promising initial use cases to emerge involves cryptocurrency exchanges. In December of 2020, Kraken exchange announced that it will begin supporting Lightning Network in 2021. At first, only withdrawals will be allowed as they get systems acclimated, but payment channels may become possible so that Lightning transactions can be done directly with the exchange.

Watchtower

Watchtowers are third parties that run on nodes to prevent fraud within Lightning Network. For example, if Sam and Judy are transacting and one of them has malicious intent, they may be able to steal the coins from the other participant. Let’s say Sam and Judy put up an initial deposit of 10,000 bitcoins and a transaction of 3,000 has taken place in which Sam purchased goods from Judy. If Judy logs off her system, it is open to possible fraud. Sam could broadcast the initial state, meaning they both get their initial deposits back as if no transactions were done. In other words, Sam would have received 3,000 BTC worth of goods for free.

This process of closing the channel based on the initial state versus the final state in which all of the transactions have been done is called fraudulent channel close. The watchtower or third party can monitor the transactions and help prevent fraudulent channel close.

The Bottom Line

The Lightning Network is an ever-evolving concept that is likely to make a significant difference to Bitcoin’s blockchain. However, the network might not be the solution to all of the challenges facing Bitcoin. Also, as new changes and improvements are made to the network, there’s the potential for new problems within the cryptocurrency’s ecosystem. Much will depend on the research and development of new technology in the future.

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