Lightning Network technology could solve two of the most daunting challenges on the Bitcoin network, namely delayed transactions and transaction fees which have reached over $30 in the last few months.
This could disrupt altcoins that market themselves as helping users to lower transaction fees. For instance, Litecoin transaction fees are about $0.39, Bitcoin Cash’s 0.05, Ethereum’s $0.33 compared to Bitcoin’s $22.99. With Lightning Network, Bitcoin transaction fees could even go to zero.
Lightning network could also bring back some types of payments on Bitcoin network. Thus it is given that some had completely disappears as a result of high on-chain transaction fees. It will realize instant transactions on the Bitcoin network.
Lightning Network is a smart contract on the Bitcoin blockchain. However it allows coin holders to do fast, cheap payments between them. The parties can transact directly without broadcasting the transaction to all the nodes and publicly so it saves time. By avoiding to broadcast to all of the network, they avoid spending time meant to interact with the other parts of the blockchain.
It works by the two parties putting tokens in a two party multisig Bitcoin address. The two can then sign a new exit transaction to spend from the channel address. The most recent exit transaction signed by the two parties invalidates old exit transactions.
In case of dispute in the transaction, one party can send the last valid state that is the agreement by the two parties. This way, the last valid state signed by the two acts as a sort of judge.