Learning the friendly way

The Curve protocol and Curve DAO token form another innovative project to come from the DeFi movement and one that provides a particularly unique and well-designed concept. Improving on functionalities that DeFi platforms like Uniswap and Sushiswap have otherwise neglected, Curve focuses on providing a viable alternative solution to traditional financial platforms in the blockchain industry.  

The Curve Finance platform, launched in January 2020, later released a decentralised autonomous organisation (DAO) alongside the Curve DAO token eight months later. CRV functions as the in-house token of the platform.  

What Is Curve DAO (CRV)?

The Curve platform, formally known as Curve Finance, provides traders with a decentralised exchange on which to swap digital assets. Curve aims to provide minimum price slippage between two tradable crypto assets by focusing on stablecoins or assets of similar value. Through an automated market maker (AMM) and focused smart contracts, the decentralised exchange is able to manage liquidity.  

While the platform can be compared to Uniswap, in reality, it has some key differences and a much higher amount of locked liquidity. The platform and its liquidity providers are more focused on stablecoins and other coins of that nature. CRV tokens fuel the network and are a tradable asset for crypto users.

The Curve DAO provides more decentralised governance to Curve's trading platform. The Curve protocol has grown into a well-respected financial asset within the DeFi ecosystem with its strong DeFi protocol.

Who created the Curve protocol?

The Curve platform was created by a Russian scientist with ample experience in the crypto industry. Michael Egorov both founded the platform and acts as its CEO. He previously co-founded a crypto business focused on building privacy-oriented protocols and infrastructure, NuCypher, in 2015, as well as LoanCoin, a decentralised bank and loans network.

As of August 2020, Egorov holds 71% of the governance tokens after locking up a large amount of CRV tokens in response to yearn.finance’s increasing voting power in the Curve network. In a statement made later, Egorov admitted to “overreacting”.  

How does Curve work?

Launched prior to Uniswap V2, Curve Finance operates similarly to the DeFi platform but has implemented some key differences. The decentralised exchange differentiates itself from the original AMM platform by innovating the liquidity pool trading structure and relevant smart contracts.

The Curve DAO trading platform is managed by a mathematical function called a bonding curve, which is designed to let cryptocurrencies trade for the best possible price amongst each other. Bonding curves are also used by other DeFi trading platforms, like Uniswap.

Due to the Curve DAO platform being primarily focused on stablecoins, its bonding curve is specifically focused on these pegged digital currencies and is able to trade a larger amount of stablecoins with less change in their relative prices in a liquidity pool.

Lending pools

In order for the Curve DAO platform to operate, it requires a group of users who are willing to lock up their cryptocurrencies in order for them to be traded by others. The platform provides a return on their coins plus a portion of the fees from trades when incentivizing liquidity providers.

The platform manages the coins in the liquidity pools by making them more expensive or cheaper, based on their fluctuating amounts, thereby making them more attractive to buyers and sellers using the platform.

On Uniswap, liquidity pools are based strictly on predetermined trading pairs while on Curve DAO the liquidity pools comprise multiple assets. On Curve DAO, entire liquidity pools can also be used as an asset inside another liquidity pool.

How does a trader use the liquidity pools?

Once a trader adds liquidity to a specific pool, through stablecoins or other digital assets, the user will receive a token specific to that pool. 3pool is an example of one of the most popular liquidity pools on the Curve platform.  

While the platform is known to provide trading for stablecoins, it also supports mirrored assets such as renBTC and wBTC. These assets are both built on the Ethereum blockchain and track the price of Bitcoin in a typical derivatives fashion. Since the prices are close in value they can function in the same pool and be traded using the Curve DEX.

What is the Curve DAO token (CRV)?

The CRV token is the utility token and governance token of the Curve DAO platform, providing users with governance rights, an incentive structure for fee payments, as well as providing long-term rewards to liquidity providers. CRV tokens are awarded to users based on their liquidity commitment and length of ownership.  

The Curve DAO token was launched alongside the Curve DAO in August 2020. The maximum supply is 3.03 billion CRV tokens, with 62% of that being distributed to liquidity providers. The rest is allocated between employees (3%), and shareholders (30%), and a small percentage is kept for community reserves (5%). Employee and shareholder allocations work off of a two-year vesting schedule.  

At the time of writing, over 531 million CRV tokens are in circulation, roughly 16% of the total supply.  The market cap at the time was around $365 million, positioning the Curve DAO token network in the top 20 biggest platforms in the DeFi ecosystem.

How can I buy Curve DAO tokens?

If you’d like to buy Curve DAO tokens to include in your crypto portfolio, you can do so easily through the Tap mobile app. Providing a highly secure and equally simple crypto trading platform, users can buy CRV with British Pounds or Euros, or exchange tokens for other cryptocurrencies supported on the platform such as Bitcoin or Ethereum.  

Simply download the app, create an account and follow the steps to get verified through the KYC process. You will then have access to several wallets, and a much simpler crypto trading experience.  

L’univers crypto peut parfois sembler parler sa propre langue. C’est pourquoi nous vous aidons à y voir plus clair, notamment sur la question des tickers. D’abord introduits dans le monde de la bourse au 19e siècle pour simplifier le trading, les tickers sont des abréviations utilisées pour représenter une action — ou désormais une cryptomonnaie — sur les plateformes de trading. Dans cet article, nous allons vous aider à éviter toute confusion avec un petit guide pratique.

C’est quoi un ticker crypto ?

Un ticker est une abréviation de quelques lettres qui représente une cryptomonnaie sur les plateformes centralisées ou décentralisées. Par exemple, BTC pour Bitcoin, ou ETH pour Ethereum.

Deux cryptos peuvent-elles avoir le même ticker ?

Non, pas sur une même plateforme. Chaque actif doit avoir un ticker unique pour éviter toute confusion. Cependant, certains projets peu scrupuleux copient les tickers de cryptos populaires pour attirer l’attention — un signe clair qu’il vaut mieux s’en méfier.

Pour clarifier tout ça, on a classé les tickers par catégorie : cryptos axées sur les paiements, stablecoins, mèmes, plateformes de développement et gaming.

Cryptos orientées paiement

Depuis l’arrivée de Bitcoin, de nombreuses cryptos se sont positionnées comme alternatives de paiement numérique. Cela a entraîné une multiplication des projets utilisant le mot “Bitcoin” dans leur nom, ce qui a pu prêter à confusion.

• BTC – Bitcoin : La toute première cryptomonnaie, et toujours la plus connue.
• LTC – Litecoin : Un fork de Bitcoin qui se veut plus rapide et moins cher pour les paiements.
• XRP – Ripple : Connue pour ses transactions ultra-rapides, notamment dans le secteur bancaire.

Stablecoins

Créées pour réduire la volatilité des marchés crypto, les stablecoins sont indexées sur des devises fiat comme le dollar américain.

• USDC – USD Coin : Lancé par Circle et Coinbase, indexé sur le dollar.
• USDT – Tether : Le tout premier stablecoin, également indexé sur le dollar.

Mèmes et tokens communautaires

Depuis l’explosion de Dogecoin, les cryptos "mèmes" ont conquis un large public.

• DOGE – Dogecoin : Le mème original, lancé comme une blague mais devenu très populaire.
• SHIB – Shiba Inu : Une réponse à DOGE, avec un écosystème DeFi complet.

Plateformes orientées développement

Certaines cryptos ne servent pas seulement de monnaie, mais aussi de base pour créer des applications décentralisées (dapps).

• ETH – Ethereum : Le leader des plateformes de smart contracts.
• ADA – Cardano : Un projet axé sur la recherche académique et la scalabilité.
• DOT – Polkadot : Spécialisé dans l’interopérabilité entre blockchains.
• LINK – Chainlink : Fournit des données externes aux smart contracts.
• SOL – Solana : Connu pour sa rapidité et ses frais très bas.

Cryptomonnaie gaming et métavers

• MANA – Decentraland : Utilisé dans le jeu de réalité virtuelle Decentraland, ce token permet d’acheter des biens et services dans le métavers.

En résumé

On espère que ce guide vous aide à mieux comprendre les tickers crypto, surtout si vous débutez dans l’univers des actifs numériques. Tant que le secteur reste en cours de régulation, Tap vous propose un moyen simple, sécurisé et intuitif d’acheter, vendre et stocker vos cryptos.

Toutes les cryptomonnaies sont affichées avec leur prix en temps réel — vous permettant d’investir ou d’échanger facilement via virement bancaire, où que vous soyez.

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Parmi les nouveaux crypto-actifs disponibles sur Tap, Chainlink (LINK) fait partie des plus prometteurs. C’est aujourd’hui l’un des plus grands réseaux d’oracles décentralisés, capable de connecter des données du monde réel aux applications déployées sur la blockchain.

Mais pourquoi s’y intéresser, alors qu’il existe déjà de nombreuses plateformes décentralisées ? Parce que Chainlink résout un problème clé : l’impossibilité pour les smart contracts d’interagir facilement avec des données extérieures à la blockchain. On vous explique.

Qu’est-ce que Chainlink (LINK) ?

Chainlink est une plateforme d’oracles décentralisés qui permet aux smart contracts (contrats intelligents) de recevoir des données du monde réel. Ces données peuvent inclure des taux de change, des résultats sportifs, la météo ou encore des cours boursiers.

Sur une blockchain, les smart contracts fonctionnent de manière autonome mais ont besoin d'informations externes pour s’exécuter correctement. Chainlink agit comme le pont entre ces contrats et les sources de données extérieures, grâce à un réseau d’oracles sécurisés et incités à fournir des données fiables via un système de réputation.

Qui a créé Chainlink ?

Le projet trouve ses origines en 2014 avec la création de SmartContract, fondé par Sergey Nazarov et Steve Ellis. L’idée était déjà de connecter les smart contracts à des données et à des paiements bancaires externes.

C’est en 2017 que la première version de Chainlink est dévoilée, accompagnée d’un whitepaper et d’une ICO réussie qui a levé 32 millions de dollars, en vendant 35 % de l’offre totale de 1 milliard de tokens LINK.

Comment fonctionne Chainlink ?

Pour faire simple, Chainlink fournit une infrastructure hors-chaîne (off-chain) permettant aux smart contracts d’accéder à des données extérieures, sans avoir besoin que chaque développeur code ses propres oracles.

Voici les trois étapes clés du fonctionnement de Chainlink :

Sélection des oracles

L’utilisateur définit un contrat de niveau de service (SLA) décrivant les données souhaitées. La plateforme sélectionne ensuite les meilleurs oracles correspondants et verrouille les tokens LINK nécessaires dans un contrat de correspondance.

Collecte des données

Les oracles récupèrent les données auprès de sources externes, les vérifient, puis les transmettent au smart contract sur la blockchain.

Agrégation des résultats

Un contrat d’agrégation analyse les réponses fournies, évalue leur fiabilité et détermine un résultat final à transmettre au smart contract. Il enregistre également la performance des oracles (temps de réponse, taux de réussite, nombre de requêtes traitées, etc.).

Quelle est la différence entre oracle centralisé et oracle décentralisé ?

Contrairement à une solution centralisée où une seule entité fournit les données, Chainlink fonctionne avec un réseau décentralisé d’oracles indépendants. Cela permet de réduire les points de défaillance et de garantir la fiabilité des données utilisées dans les smart contracts.

Chainlink peut aussi interagir avec des oracles externes à son propre réseau, via les modules Chainlink Core et Chainlink Adapter. Et tout cela fonctionne en Proof-of-Stake, avec un système de staking qui renforce la sécurité du réseau.

En quoi Chainlink est utile ?

Grâce à Chainlink, les développeurs peuvent connecter facilement leurs smart contracts à des données externes comme une API, un système interne d’entreprise ou un flux d’information quelconque, sans avoir à réinventer la roue à chaque fois.

Aucune plateforme supplémentaire n’est à apprendre : Chainlink s’intègre directement aux blockchains existantes et n’applique aucun frais d’accès à ses services oracles. Les opérateurs de nœuds sont rémunérés en LINK.

Qu’est-ce que le token LINK ?

LINK est le token natif du réseau Chainlink. Il sert à payer les oracles, à staker pour sécuriser le réseau, et à déterminer la priorité des opérateurs dans le traitement des requêtes.

Le token remplit trois fonctions principales :

• Récompenser les nœuds oracle pour la récupération et la transmission de données
• Inciter les opérateurs à fournir des données fiables
• Staker pour exécuter un nœud Chainlink et garantir la qualité du service

LINK est un token ERC-20 qui alimente tout l’écosystème Chainlink.

Comment acheter Chainlink (LINK) ?

Vous pouvez acheter et stocker du LINK directement dans l’app Tap, en quelques clics :

• Échangez vos crypto ou vos devises fiat contre du LINK
• Achetez LINK avec votre carte Visa ou Mastercard
• Gérez votre portefeuille depuis l’application Tap avec un accès sécurisé

Prêt·e à faire un pas de plus dans l’univers des smart contracts connectés au monde réel ? Chainlink vous attend sur Tap.

Cryptocurrency whitepapers are detailed documents that outline the project's intentions, products, and infrastructure. While there isn't a rule on what needs to be included, most projects aim to share as much information about how the project aims to succeed in the hopes of building investors' trust, and interest.

Some of the topics typically covered include a summary of the project's team, goals, products, features, and tokenomics. When researching a blockchain or cryptocurrency project, whitepapers are a very good place to start.

What is a whitepaper?

A typical cryptocurrency whitepaper is usually a report or guide that teaches its readers about a certain topic or problem. As an example, developers might make a whitepaper covering their software to inform users about what they are constructing and why.

In the crypto space, a whitepaper is released by a project and assists in outlining the technical guidelines and core features of the project. While many whitepapers focus on specific coins or tokens, they can also be concentrated around various types of projects, like decentralized finance (DeFi) platforms, for example.

Cryptocurrency whitepapers will typically consist of statistics and diagrams outlining the project's core date, as well as the governing structure of the project, the team involved in creating and leading it, and their roadmap (current and future development plans).

What value do crypto project whitepapers serve?

Despite not being worth a monetary value, whitepapers play an important role in the crypto space. While there are no official criteria for creating them, whitepapers are integral to investors, researchers, developers, and industry insiders.

A great place to start for anyone interested in a project is to read through the whitepaper. If you're considering investing, it's best to meticulously read through it again. Whitepapers often provide insights into the project's potential red flags and a means to monitor whether they are sticking to their forecasted timeline.

A number of blockchain projects that have crashed displayed subtle warning signs in their whitepaper, like promising a deliverable without providing any evidence on how it will be executed.

How does one make a cryptocurrency whitepaper?

There are no official rules or outlines that projects need to follow when creating a crypto whitepaper, each blockchain project may determine what is best for that individual situation. As mentioned earlier, these are often the first official documents outlining the project to potential investors, so thorough and informative content depicting the project's structure, goals, and roadmap is best included.

Whitepapers should always be neutral, and avoid persuasive language or making too many promises. This is essentially a "business plan" in the crypto sense released to investors or the public prior to launching.

What info is included whitepaper?

Objectives

Whitepapers are created by founders to provide a comprehensive overview of both the project and the goal. For instance, Bitcoin's whitepaper describes the project's core objective as "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

While Ethereum's whitepaper describes its intention as "The intent of Ethereum is to create an alternative protocol for building decentralized applications."

In a good cryptocurrency whitepaper, the project will outline what specific problem it aims to solve, and how it will improve various aspects of people's lives. Be cautious of projects that promise the world but have little in the way of evidence to back these claims. In the ICO boom of 2017, thousands of projects overpromised and underdelivered (if they delivered at all).

Blockchain specifications

Whitepapers will typically include how the cryptocurrency will work and function in the greater crypto ecosystem. This might outline technical aspects like the consensus mechanism the blockchain will utilize and how the decentralized aspect of the network will function.

Tokenomics

Another core piece of information that should be included in a project's whitepaper is the tokenomics. This will include information on the token, how it will be allocated, whether will it participate in token burns, or any incentive mechanisms.

Roadmaps

Roadmaps (a project timeline)are not just useful to see how a project aims to deliver on its objectives, but also provide insights into whether the project can keep up with its promises. While missing a deadline isn't a deal breaker in the crypto space, being open and communicating why is important.

Readability

A well-articulated whitepaper will typically be written in a manner that anyone can understand them. However, its important for the new blockchain project to also include certain technical specifications to provide evidence of the project's competence. Anyone can write a whitepaper, it takes technical know-how to create a blockchain platform.

Tips for reading a cryptocurrency whitepaper

• first and foremost, ALWAYS read a project's whitepaper before investing
• read whitepapers with a pinch of salt, they must be neutral and not over-promise
• Look into the team members and their experience in the crypto and blockchain realm
• a great idea doesn't necessarily mean it will be used or adopted
• look for technical explanations that showcase the project's understanding

Examples of crypto projects’ whitepapers

The Bitcoin whitepaper (2008)

The instigator of the entire cryptocurrency industry, Satoshi Nakamoto, an anonymous individual or group, published the Bitcoin whitepaper in 2008. The paper is called "Bitcoin: A Peer-to-Peer Electronic Cash System."

The whitepaper explains how Bitcoin can be used as a more efficient and decentralized form of money, outside the traditional banking model. It gives technical explanations of how the peer-to-peer Bitcoin network allows users to send digital currency without intermediaries. The whitepaper also outlines how the Bitcoin network is resistant to censorship and double-spending attacks.

The project launched two months later in January 2009.

The Ethereum whitepaper (2014)

While Bitcoin launched the crypto industry, Ethereum played a pivotal role in the development of the blockchain space. The Ethereum whitepaper was published in 2014 by a young developer named Vitalik Buterin and titled "Ethereum whitepaper: A Next Generation Smart Contract & Decentralized Application Platform."

In the Ethereum whitepaper, Vitalik outlines how the platform's intentions differ from Bitcoin's. The whitepaper outlined how the platform would allow developers to create and launch decentralized applications (now commonly known as dapps) and included technological solutions that backed these goals, such as the Ethereum Virtual Machine and smart contracts.

In conclusion

Crypto whitepapers are not legally regulated, meaning that anyone can write one. Although a cryptocurrency whitepaper should provide readers with an understanding of what the project plans to do and how, it's crucial, if you're interested in a particular project, to consider red flags and risks when reading through the document.

Decentralized Finance, or DeFi, opens up a whole world of financial services for you, ranging from straightforward banking services to complex financial instruments similar to those used by hedge funds and investment bankers. But here’s the twist: it all operates with cryptocurrencies instead of traditional cash.

In DeFi, you can stake your cryptocurrency in what are called smart contracts, which essentially means locking up your funds to earn interest, known as Annual Percentage Yield (APY). As a token of appreciation for staking your funds and providing liquidity, DeFi projects grant you special project-specific tokens. These tokens aren’t just a thank-you note—they give you a say in the project’s future decisions and carry some speculative value too.

Before we get started, let us first address several terms you are likely to come across in this piece:

• Financial institutions are your traditional banks
• Centralized exchanges are crypto exchanges that are operated by a managing company
• Decentralized exchanges are crypto exchanges that are not managed by one company and typically work in a peer-to-peer manner.
• DeFi is decentralized finance and refers to the industry in which regular users can engage various financial services requiring only an internet connection.

How smart contracts work in the DeFi space

A smart contract is a digital agreement that automatically executes once the predetermined criteria have been met. These computer codes are facilitated by blockchain technology and rely on the blockchain that they are built on. 

At the moment, your bank account from financial institutions might give you the right to a certain amount of monthly interest at a fixed rate. The deal is reached through a formal application procedure - which can take many days - that is handled by a mix of people and software and is acknowledged in writing. Once successful, the bank account is opened and you have access to the services.

A smart contract, on the other hand, uses a programming language (e.g. Solidity on Ethereum) to map out the mathematical aspects of an agreement - how much interest is due when and where it should be paid - while the underlying Ethereum blockchain executes the contract for a fee, making it transparent and unchangeable.

The ups and downs of the DeFi ecosystem

owever, it’s not all smooth sailing. DeFi can offer higher returns than traditional banks, which is quite appealing, but it also comes with higher risks. For instance, if something goes wrong with a smart contract, or you lose access to your private keys, there’s no safety net to catch you.

To dip your toes into DeFi waters, you’ll need a digital wallet like MetaMask and some funds from a cryptocurrency exchange. Once you’re set up, you can participate in various DeFi activities like lending or staking, each with its own set of fees depending on the network you’re using.

Additionally to the higher returns, DeFi tokens have also seen a rise in value, with some entering the top 20 and top 10 biggest cryptocurrencies based on market cap.

Furthermore, the value of DeFi tokens has surged, with some climbing into the top ranks of cryptocurrencies by market cap. This growth indicates a strong interest and a robust market presence, which can be exciting for anyone involved in the space.

However, it's not all smooth sailing. DeFi comes with its own risks that you should be aware of. For instance, executing smart contracts can get pricey, especially during times of network congestion. If you're looking to cut down on fees, you might want to explore alternatives to popular platforms like Ethereum, which can be more cost-effective.

Also, not all smart contracts are built the same. Some may have vulnerabilities that could put your funds at risk if not properly managed or if an error in the contract execution occurs. This highlights the importance of being careful with where and how you invest your digital assets.

Moreover, the decentralized nature of these platforms means that you’re in full control—which sounds great until you realize there is no safety net. If you lose access to your private key or make a transaction mistake, there's no customer service line to call for a do-over.

Ensure you vet various DeFi protocols before engaging

In general, more established Defi protocols with a higher total value of assets secured within them (also referred to as Total Value Locked, TVL) are safer. This is due to the fact that their code has been more thoroughly audited and "battle-tested".

Newer platforms will typically offer higher APYs in order to entice investors and build up liquidity. While this may sound lucrative, always ensure that you've done your research in order to understand exactly how the protocol operates and who is behind the project. 

Here are a few things to look out for:

• Has the protocol's code been professionally audited? 
• How long has the project been live?
• What is the platform's TLV? (The higher the better)

Finding your top Defi protocol

There are a number of "well-established" DeFi platforms that have proven reliable and trustworthy in recent years. While the risks are still prevalent, these are the most established options when looking to enter the DeFi space with the leading DeFi protocols.

Aave

Compound

Maker

Yearn Finance

How to use DeFi protocols (Get started in DeFi)

Jumping into the world of DeFi protocols can be quite an adventure. Here’s a simple guide on how to get started :

First, you'll need a digital wallet, and MetaMask is a popular choice. It's user-friendly and a common gateway for engaging with DeFi platforms.

Once you have your digital wallet, you'll need to move your cryptocurrencies into it. This is usually done through a transfer from a centralized exchange. For example, if you have a Tap wallet, you can transfer Ethereum (ETH) or other supported assets directly into your MetaMask wallet. Remember, DeFi protocols operate with cryptocurrencies, not traditional bank funds.

With your wallet set up and your funds in place, you can connect to any DeFi application that interests you. You can then engage with various features of the platform, such as depositing funds into a lending protocol. Keep in mind that actions like depositing, staking, unstaking, or withdrawing will typically involve network fees, which vary by blockchain.

That’s all there is to it! With these steps, you can start exploring the different functionalities and opportunities within DeFi at your own pace.

Understanding the risks associated with DeFi

While we've stressed that using tried and tested DeFi platforms provide a higher level of security, there are still risks associated with the DeFi space.

Below are some more steps you can do in order to secure your cryptocurrency assets and decrease the chance of losing your funds.

• Consider insurance, look into options for insuring your assets to help mitigate potential losses.
• Research the team behind the project, do your due diligence.
• Familiarize yourself with the platform's operations and features. For instance, if a platform advertises a certain return rate, such as 10% APY, delve into how they achieve those figures.
• Don’t commit more than you can afford to lose

Decentralized finance is one of the most innovative and promising areas in cryptocurrency. It is also a harsh environment, however, that demands some expertise before stepping in.

Before you place any funds into Defi protocols and become one of the many liquidity providers, ensure that you've fully vetted the project and considered the pros and cons of what it has to offer. Also ensure that you understand how the platform operates.

The DeFi space can be both lucrative and devastating, it is complex and requires a good amount of know-how. If you wish to get involved, take the time to really understand both the opportunities and the challenges it presents first. This way, you can engage with DeFi more cautiously and equipped with the necessary knowledge. And remember with Defi everything is at your own risk.
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The Lightning Network is a second layer solution that enables Bitcoin users to make fast and cheap transactions without compromising on security. The layer two technology allows users to enjoy the benefits of both the Bitcoin and Lightning Network layers simultaneously. Learn more about the Lightning Network solution below.

The Bitcoin trilemma

In order to compete with other payment channels like Visa, the Bitcoin network must be able to process transactions much faster and at a fraction of the cost. However, this scaling cannot come at the expense of decentralization or security.

The "Bitcoin trilemma" is a term used to outline the conflict between these three principles, scaling, security, and decentralization. 

The aim of Bitcoin Cash, Bitcoin SV, and other forks was to increase the block size in order to make Bitcoin transactions faster and more affordable on-chain.

However, these attempts failed to produce an effective method to transact quickly and inexpensively on-chain while still maintaining Satoshi's design. Hence, the Bitcoin Lightning Network.

The lightning network payment channels solution

Is it possible for the Bitcoin network to have it both ways, to keep its original architecture while also functioning as a fast micropayments network? The answer is yes, and thanks to the advent of Lightning Network transactions, Bitcoin can be used for everyday transactions like paying for a cup of coffee.

The Lightning Network is a type of layer two solution that is compatible with the Bitcoin service. This off-chain solution was first conceptualized in 2015 by Joseph Poon and Thaddeus Dryja.

The Lightning Network works by removing the burden of micropayments from the Bitcoin blockchain and instead utilizes multiple payment channels, which are controlled via multi-signature (multi-sig) Lightning Network wallets.

Why the lightning network?

How quickly can the Bitcoin network process transactions? Bitcoin is presently capable of processing between 2 and 7 transactions per second.

Visa, the current payment channel that drives your debit and credit card transactions, handles 150 million transactions each day, that's 24,000 transactions per second.

In order to make Bitcoin a competitive service to Visa, the Lightning Network needs to be implemented. This channel ensures that micropayments are instantly and cost-effectively executed, and is able to process thousands to hundreds of thousands of transactions instantly. 

The core concepts of how the Lightning Network works.

So how does the Lightning Network work? This layer 2 solution works on top of the Bitcoin blockchain, allowing thousands of micropayments to be executed at one time. This lowers the costs and increases the transaction speed of the initial transaction. There are three core components of the Lightning Network: the nodes, channels, and invoices. 

Lightning Network Nodes

This software connects with other nodes in order to form a network that connects to the Lightning Network to facilitate the sending and receiving of Bitcoin. 

Lightning Network Channel

Users of the Lightning Network establish payment channels with one another so that they may conduct transactions off-chain, which can then be settled (closed) on the mainchain (on-chain).

Invoices

Invoices are QR codes that represent requests for Lightning Network payments on the Lightning Network. Invoices include all of the data necessary to complete a payment on the network, such as the payment amount, which blockchain the invoice is associated with, expiration date, payee pubkey, routing hints, and other information.

How to use the lightning network

In order to make use of the Bitcoin Lightning Network, you will need to open a compatible Lightning Network wallet. Once you have downloaded and signed up for the wallet, you will need to send funds. Simply locate the wallet address of the Lightning Network-enabled wallet and send the funds via your normal payment channel. Once the funds appear in your wallet, you can then send transactions via the Lightning Network to other enabled wallets.