The Lightning Network
For most people, cryptocurrencies are synonymous with Bitcoin. After reaching an all-time high of over $20,000 in December 2017 it’s now trading around $7,000 – 8,000. What is the future for Bitcoin? Will it rise or will it fold? These are questions many crypto investors ask themselves on a daily basis.
History tells us that a first mover advantage doesn’t always help. Anyone remember Netscape or Ask Jeeves? Brands from the early years of The Internet that no one thinks of today. Is this how we will view Bitcoin 10 years from now or will it be considered the world currency?
Let’s look at what could take Bitcoin to the next level.
Bitcoin is the first generation of cryptocurrency, and it’s slow. The current transaction speed is 3 btc per second. In comparison, Litecoin can do around 56 transactions per second and Dash can do 48. There is also interesting to note that the Visa network can handle more than 3,600 transactions every second.
Transaction fees can also run quite high. We experienced that during the peak of the rally in December 2017. Transaction fees could run as high as $50 during the craziest days.
These problems must be solved and Bitcoin investors’ greatest hope right now is the so-called Lightning Network. This is a technology with the potential to solve both the speed and fee problems.
When sending a “Lightning” payment, two parties deposit the funds at one bitcoin address (a channel) in which they can exchange funds a limitless number of times.
Blockchain would work as an arbiter and there would be possible to do an unlimited number of transactions off-blockchain. If this technology works there could finally be practical to use Bitcoin for buying, let’s say, a cup of coffee. This marks a transformation into a real currency.
There are many question marks surrounding the Lightning Network. This is a technology that’s still under development. Technology always moves forward and sooner or later we will have a lightning network. But the time frame is very uncertain.
RSK – Smart Contracts
Thanks to the RSK (rootstock) project smart contracts on Bitcoin could soon become a reality.
RSK is the first open-source smart contract platform. The system also rewards Bitcoin miners.
If this technology should work it could actually be a huge advantage for Bitcoin to get into smart contracts at a later stage. The reason is that the quality of Ethereum based altcoins generally speaking is very low. This market will clean itself up to a certain degree. And there will also be regulations sooner or later.
When the low-quality altcoins get weather out Ethereum’s image will take a hit. Bitcoin might be able to time these events and offer the market an alternative for smart contracts. With timing and a little bit of luck, this could be very good for Bitcoin and devastating for Ethereum.
Of course, no one can know for sure what will happen to Bitcoin or any other cryptocurrency. As an investor, you must, at least somewhat, diversify your investments in the crypto market.
Diversification doesn’t mean you should buy all the coins out there. Most of the altcoins that’s on the market today will probably not even exist a year from now. It is absolutely necessary that you do your research and stay updated.