Previously, we reviewed how the blockchain concept is not limited to any specific implementation used in Bitcoin’s blockchain. Unfortunately, the Bitcoin model has defined for some how to implement it.
Blockchain Implementation Model—Lightining
Deployments are becoming more application-specific. One example of this is Lightning.
Payment developers have turned to Lightning because Bitcoin blockchain transactions have an unacceptably slow commit time—up to 15 minutes—which is not acceptable to a payment processing system.
Transactions must typically complete in a second or so to be competitive with "old" payment systems (e.g. PayPal).
Lightning Transaction Step 1
Now specifically, Lightning is interesting because it is not all that it seems. It takes a simple payment transaction and splits it into two transactions.
The first transaction creates a "funding transaction" which is a blockchain transaction that basically privately and securely records that two parties have agreed to a joint transaction for up to a jointly agreed upon commitment value.
This will still take 15 minutes to create if it is appropriately recorded in Bitcoin blockchain.
Lightning transaction step 2
Then, there is a second "commitment transaction" which resolves how the "funding transaction" will be disposed, which includes a number of scenarios where the "funding transaction" is essentially rolled back (with penalties) or completed with the funds exchanged.
This model does not address Bitcoin's scaling problem (maximum of 8 transaction / second), and any sort of payment algorithm that requires a two transaction model with 15 minutes on the first transaction would have limited acceptability.
There appears to be other problems with Lightning, as well. However, its clear value and the source of interest in the algorithm is that it is attempting to make Bitcoin a utility token, where it is integral in useful transactions.
This raises the question of how suitable Bitcoin blockchain is for utility applications?
Let’s look at another blockchain implementation that is gaining popularity in the finance community.
Side-by-side comparison with another blockchain—Ripple
Thankfully not every developer team has fallen prey to the assumption that Bitcoin’s blockchain implementation model must be preserved. Bitcoin blockchain was never built as a payment processing protocol.
Application-specific variations benefit from deviating substantially away from the Bitcoin blockchain implementation standard. As an example of a different use case, consider Ripple for payments.
Ripple is being increasingly adopted as settlement infrastructure technology.
Gateways to enable any person or organization to put money into and take money out of Ripple's liquidity pool
Bitcoin bridge allows any bitcoin user ability to pay from a Ripple account without ever needing to hold any of the digital currency
We will begin to see more ideas brought to market to address this failing of Bitcoin blockchain for use in payments, and other "utility" applications in the days ahead. Solution models are being developed to work around its limitations.
It will be interesting to see how blockchain developers increase liquidity and reduce transaction time over the next year or so. We are doing business at an exciting time in the Internet of value.
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