Lightning networks are considered a promising innovation in the Bitcoin space, which would make the Bitcoin system much more scalable and able to process transactions at a high rate and low cost, and are suitable as an alternative to existing payment networks.
In February, developers Joseph Poon and Thaddeus Dryja proposed a decentralized Bitcoin Lightning Network where related transactions can take place instantly on “micropayment channels” off-chain, and only the final settlement is processed by the blockchain. According to the authors, lightning networks would enable Bitcoin scalability, efficient micropayments, and near-instant transactions. The Lightning Network white paper, a work in progress, has recently been updated.
“The payment network Visa has achieved 47,000 peak transactions per second on its network during the 2013 holidays, and averages hundreds of millions per day,” note the developers in the white paper. “Currently, Bitcoin supports less than 7 transactions per second with a 1 megabyte block limit.”
It seems evident that as long as the transaction rate supported by the Bitcoin network remains that low Bitcoin won’t be able