Skip to main content

Bitcoin's Second Layer Scalable Solutions

Bitcoin's Second Layer Scalable Solutions

Bitcoin is that popular cryptocurrency which has changed the lives of millions of people across the world. Though Bitcoin has gained huge success and world-wide adoption, people must not have imagined this thing during the time when it was introduced. Back in 2009 when it was launched by Satoshi Nakamoto, most of the people were quite sceptical about it while a very few of them were confident about the success.

While creating Bitcoin, the main aim was to build up a system where there will not be any kind of third party intervention. Along with this, it was meant for really fast transactions and highly cost-effective at the same time. However, with the increase in popularity and adoption of the network, it seems that this motive of fast and cost-effective transactions seems to be lacking behind. People have a lot of queries regarding the transactions speed and price of Bitcoin. This is called the Bitcoin scalability problem when the network is able to perform transactions at a very limited rate. In order to solve this problem, there are second-layer solutions for Bitcoin.

Second layer solutions

The main purpose of these second layer solutions is to make the technology as much stable as it can. Through this, the scalability problem that the Bitcoin network faces, is solved. These solutions are developed on the top of the main blockchain which helps in reducing the congestion of the network and promotes faster speed.

Lightning Network

One of the most common and widely used second layer solutions is Lightning Network. This solution uses the micropayment channels which helps to reduce the scalability difficulty and ultimately increase the capability of blockchain to conduct the transactions. These micropayments are done using a complete network of various payment channels between the bitcoin users and parties. It has been seen that all the transactions which have been done using the lightning network do not take place on the Bitcoin blockchain. In order to perform its task, Lightning Network uses multi-signature scripts and along with this, it requires smart contracts to improve blockchain’s capability to increase the number of transactions.

SegWIT

Another option that has been used to deal with the scalability problem on the Bitcoin network is Segregated Witness (SegWIT). This platform has been launched to operate in such a way that the signatures should not be placed along with the data of transactions. Through this, it will be able to store more transactions in one block and ultimately the speed of transactions will be increased. This option has been adopted by various blockchains and cryptocurrencies but one of the prominent ones is Bitcoin. Different Bitcoin projects are relying upon it in order to improve the efficiency and the speed of the transactions.

Bitcoin Exchanges using Second Layer Scalable solution

With the introduction of these second layer scalable solutions, it has been seen that a lot of exchanges have been using them in order to avoid the scalability problem on the network. The most prominent one is the Bitcoin exchanges to use such solutions.

Bitfinex

Bitfinex, one of the largest crypto exchange which is based in Hong Kong, has extended its hand to the Lightning Network. This step was taken to deal with the scalability problem which is generally there on the Bitcoin network. It has been seen that as soon as the exchange started using Lightning Network, the users were able to get instant transactions for their withdrawals and deposits.

River Financial

Not a prominent one but River Financial is another well known Bitcoin exchange that has been using Lightning Network in order to deal with the scalability problem. It is quite a new exchange but adding such kind of options to its platform is quite a big and smart decision which will help them to attract more users.

Gemini 

Gemini is one of the prominent and largest Bitcoin exchanges which has added its support for SegWIT. It is there to improve the speed of the transactions by boosting it up and not only the speed, but it also works to reduce the transaction fees which is going to a great step towards reducing the scalability problems. Being such a big exchange, Gemini has set an example for various exchanges to deal with the blockchain scalability problems using the second layer solutions.

Limitations of Second Layer Solutions

This is an undeniable fact that second layer solutions have played quite a major role for different blockchain and cryptocurrencies. However, there are several issues and limitations also which are associated with it and some of them are -
  • Transaction fees problem - Even though, second layer solutions play quite a major role in reducing the transactions fees and increasing their speed at the same time. It is not accurate to say that these solutions will be able to solve the transactions fees problem completely. 
  • Prone to hacks and thefts - These solutions are there to increase the transaction speed and reduce the fees but for this, there is a need to remain online all the time. Particularly to receive and send the payments on the network. Due to this, the network becomes prone to various hacks and thefts.

Conclusion

With the increase in Bitcoin adoption and this growing network, the scalability problem is increasing with each passing day. Because of this, there is a high need to adopt second layer solutions for different crypto exchanges out there in order to provide better facility to the crypto users.


Comments

Post a Comment

Popular posts from this blog

Is celebrity support an added advantage to cryptocurrency growth?

  Celebrities are prominent figures in society. We admire them for their looks and get influenced by whatever brand they endorse. So can we say that their support for cryptocurrency is an added advantage? Well, up to an extent yes. Since they are public figures and rule the hearts of their fans, this indeed can be an added advantage in the growth of cryptocurrency.  But it is not completely true. The cryptocurrency rose to fame because of the unique features and advantages they provide to their users. First of all, they allow users to have the ownership of tier money which is not in the case of government-issued currencies. If you look at the whitepaper of Bitcoin framed by its founder Satoshi Nakamoto, then you will find that it restricts the interference of third parties and central authorities like banks and the government.  Cryptocurrency is now considered an investment asset by most crypto enthusiasts. Many people have become richer by it. Akshay Haldipur from India ...
Post a Comment
Read more

Bitcoin Mining Pools See Huge Shuffle in Prior To Bitcoin Halving

Chinese Bitcoin mining giants, Poolin and f2pool have witnessed substantial growth in their daily BTC block reward in January 2020. The dominating mining pool, BTC.com has dropped in the reward earning. This is how the tables are turning, prior to the highly-anticipated third halving. In the last couple o f weeks, Bitcoin has gone through some wholesale changes in its mainstay metrics. Take into consideration the example of the Bitcoin hash rate, which recorded its new all-time high just recently , has now entered a declining phase. The dominance, which usually hovers around 70 %, has now fallen close to the 60% mark. A pivotal part would be played by these elements on the price prior to the Bitcoin halving. F2pool is recording the highest BTC block reward earnings when it comes to the known mining pools . Elias Simos, a senior research analyst at Decentral Park, tweeted : Elias Simos @eliasimos A lot of reshuffling in the $ BTC mining game sin...
Post a Comment
Read more

Canadian Investment Firm 3iQ Files Prospectus for Bitcoin Fund

A Canadian Investment f irm 3iQ filed a prospectus for Bitcoin Funds with hopes to attract retail investors with a regulated digital asset fund. T he firm announced that it had filed a preliminary prospectus for a close-end Bitcoin fund; that it anticipates to unveil through the Toronto Stock Exchange later in the year . Fred Pye, the Chief Executive of the firm wrote :  : “We expect to list on the Toronto Stock Exchange in late December or early January. As a part of our next steps, we’re hoping to get Canada’s big banks on board. We’re hoping that two or three of Canada’s biggest banks, specifically ones that want to lead in fin-tech space, will join the syndicate group.” The Canadian investment funds manager revealed that they filed the Bitcoin fund prospectus regards to an Initial Public offering of both Class A and Class F units each at $10. Pye, a former senior vice president of Fidelity Investments -Canada; highlighted that retail investors have been s...
Post a Comment
Read more