Bitcoin has come so far since its inception, and not only in terms of value proposition. While it has surged in popularity following the year-long bullish run of 2017, Bitcoin has also become widely adopted by both consumers and merchants as a legitimate electronic payment system. But as the number of Bitcoin users increased, so did its scaling problems. The system doesn’t seem efficient enough to handle countless transactions that would truly make the cryptocurrency the “cash” of the future.
The Lightning Network has long been heralded as the solution to Bitcoin’s scalability issues. This technology essentially creates a layer on top of Bitcoin which enables faster and cheaper transactions. This layer eventually settles to the Bitcoin blockchain, but a huge amount of data is required for the network to operate. Because of this, the Lightning Network proves troublesome to download and run.
Many investors have been looking forward to the official release of the Lightning Network. In fact, the potential of this technology to end the scaling debate is so immense that people continue to view Bitcoin in a positive light. This is evidenced by the increasing number of users of cryptocurrency trading software such as Crypto CFD Trader. But while the world has yet to see what the Lightning Network can do; the developers are already looking to change key elements in the system to make it even more efficient.
Co-founder of Lightning Labs ‘Laolu’ Osuntokun teamed up with Blockstream’s Rusty Russell and Christian Decker to offer an alternative to the current Lightning Network. This simplified version is called eltoo, the phonetic spelling of L2, which refers to the technology that takes out transactions from the Bitcoin blockchain itself.
The developers emphasize that this change reduces the amount of data users need to store, but it’s also designed to keep their cryptocurrency safer. It has been known that broadcasting older data by accident can cause users to lose money. This data is called “toxic information,” and it’s one of the problems eltoo looks to address.
Interestingly, eltoo uses the old sequencing mechanism to make transactions safer. Only the most recent off-chain transaction data is stored to prevent the information asymmetry problem. This occurs when the device in which you’re running the lightning app breaks down, you might lose access to your entire data history.
Eltoo is meant to encourage more transactions using Bitcoin without littering the blockchain with toxic information. The mechanism is designed in a way that only the last settlement transaction can be confirmed on the blockchain. Each lightning node only needs to store the most recent version and any additional information about the transaction itself.
The developers add, however, that eltoo is anything but perfect. Trade-offs need to be made. Critics say that eltoo will increase waiting times needed to confirm each transaction, which could defeat the purpose of this alternative version. Still, they’re excited to see how it could make the blockchain more efficient all while securing the cryptocurrency of users and contributing to the demise of the scaling issues.