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Blockchain vs cryptocurrency: The birth of Lightning Network

Something that has gained considerable momentum in the world, is that blockchain and cryptocurrency are separate entities and one can exist without the other.

In fact, so much so has this narrative been suggested, that the masses believe the two things are in fact separate when the reality is, there is no separation – one cannot exist without the other.

To put this simply, there are no blockchains that exist without an underlying currency, and there are no currencies that exist without an underlying blockchain.

Elizabeth Stark, the CEO of Lightning Labs, claims the idea that blockchain and cryptocurrency were separate came directly from her company and their project Lightning Network.

Lightning Network is considered to be a second layer blockchain protocol. The original intent of lightning network was to help with issues and problems people foresaw in the ability of bitcoin to properly scale and become a true currency.

The idea was to create a payment channel between users that keep most transaction off of the blockchain and to instead only use the blockchain to record the combined total of all transactions between two parties.

To make this easier to understand, the wallet provider of Coinbase and the company of Starbucks could open a private channel of trust between each other.

In doing so, Starbucks could perform thousands of transactions each day with people who used the Coinbase wallet, without each person having to pay a transaction fee. At the end of the day, Starbucks could then total up all the transactions it had performed between its sales and users of the coinbase wallet, and send all the transaction as 1 large transaction onto the bitcoin blockchain.

This would cut down the amount of congestion on the network, while also reducing the fee’s of users so that the cup of coffee they were purchasing did not have transaction fee’s larger than the cost they were spending.

In a similar fashion this is how credit cards work where at the end of the business day, a company will send in a batch form all the credit card transactions they have done during that day to the credit card processing company. All those swipes are really doing is verifying the money actually exists for the card holder, and putting the money on hold so it cannot be used by the card holder after the purchase. The actual transfer takes place at the end of the day.

According to Elizabeth in an interview with Yahoo:

When we first pitched my company Lightning Labs, we actually took the word ‘bitcoin’ out of our deck and our marketing material because it was so much about blockchain,” she says. “Now, I feel like we’ve entered into a ‘bitcoin, not blockchain’ world, where people understand the value of cryptocurrency technology and what these can bring. You also have proof of work in bitcoin, you have the public/private key cryptography. There are other things that make bitcoin special. Somehow, the blockchain part got separated and became a thing.

Elizabeth talks about how the media and corporate world have tried to use this separation of blockchain from cryptocurrency, specifically bitcoin, as a means of downplaying the importance of cryptocurrency to the financial sector. However she also admits, she is somewhat glad this downplay is taking place.

“I kind of want things to calm down a bit — big price spikes aren’t good for us technical folks that are developing,” she says. “We are in the early days of bitcoin. This is a marathon, it’s not a sprint. I think people wanted it to be a sprint, but it’s going to take time.”

The messages she is trying to deliver to the world are numerous. First is that unlike many alternative technologies, bitcoin is not trying to sprint ahead to please investors. That this is a slow race and those who do it properly will always end up as the front-runners in technological advancements.

This is an important factor to take into account as it has many different implications.

It mean’s the people involved with bitcoin and its future, are not worried about profits and investors. It also shows that most of these new alternative technologies are coming out thinking they can simply outspend bitcoin to become the newest and best technology because they are trying to please investors.

In fact, Elizabeth is well-known for speaking out against the practice of hosting ICO’s in the blockchain space.

It also sets an example for future projects that ICO’s are not needed in this technology.

The private funding rounds, which is where the money came from to support the lightning network project from well-known cryptocurrency supporters such as Jack Dorsey; Charlie Lee; and Vlad Tenev, will work just as well.

In fact she says:

We are back to a ‘bitcoin, not blockchain’ world

Whereas it’s unlikely that ICO’s are going to stop anytime soon, the hope is someone of such influence will make new project creators think twice before jumping on the ICO bandwagon and instead look for private funding rounds from people inside the crytpocurrency industry who understand the technology and plans to help back their funding.

This would certainly reopen the doors for many projects who otherwise feel ICO’s are the only way to carry a project forward.

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