Could Lightning Network be useful on Bitcoin Cash ?
For mostly ideological reasons, the use of Lightning Network (LN) has frequently been dismissed on the Bitcoin Cash blockchain. However, some use cases could gain from this technology.
What is Lightning Network ?
This small post will avoid being too technical : in a nutshell, LN is a peer-to-peer payment protocol that operates "on top" of a blockchain or aside of it, allowing instant transactions between peers through bidirectional channels.
In order for these channels to work, they need some funding that will be reflected in an opening transaction on the blockchain ("on chain"). Every other transactions among the LN peers will then happen off the main blockchain ("off chain"), letting them settle their exchanges between themselves. When needed, an ending transaction, on-chain this time, can close the channels and settle all accounts between the participants.
Of course, these two paragraphs grossly simplify the concept, but it gives a good idea what LN was built for in the first place : almost instantaneous transactions amounting to small (or very small) values, a great number of occurrences with regular participants for almost no fee.
However, from this general idea of payment channels used to accommodate small recurrent transactions between a limited number of parties, LN slowly grew into if not "the" at least "a" scaling solution for Bitcoin, to alleviate the problem of clogged blocks and skyrocketing on-chain fees, notably by introducing "hops" (payment from channels to channels). In this vision, LN would, at some point in the future, be able to handle pretty much all transactions, including every day purchases (the proverbial cup of coffee) and much more.
What about Bitcoin Cash ?
In parallel, one has to remember that by growing the size of the block of transactions processed on-chain, Bitcoin Cash does not have the same issues Bitcoin has, such as the bloating of the transaction queue (the mempool) and the consequent rise in fees.
One could then dismiss the Lightning Network proposal : there are lots of good reasons to think that a decent block size increase will allow Bitcoin Cash to handle much more than the 3 to 7 transactions per second that Bitcoin is currently handling. At least, the past months have shown that Bitcoin Cash can readily handle blocks of 8 megabytes (during January, there were a few days with a huge number of transactions that were cleared very easily), without the fees skyrocketing.
With the recent update to allow up to 32 megabytes blocks, the theoretical throughput for Bitcoin Cash is around 100 transactions per second, still with very low fees. Besides, the work and tests done by P. Rizun on gigabyte blocks have demonstrated that there is still a lot of room to grow.
However, this does not mean that the general concept of payment channels, as described in Lightning Network, has no purposes in Bitcoin Cash. By the way, Lightning Network can be slightly altered to adjust with Bitcoin Cash blockchain and the general architecture of this blockchain does not prevent it to run side chains.
The fact is LN could well be proposed for specific payment channels and targeted uses on Bitcoin Cash.
Typically, LN is well suited for recurrent payments (very frequent) between known parties and micro-transactions where fees are a small fraction of satoshis ; these payment channels could fit whenever a payment is done by small fraction of time or volume.
For instance, rentals (from cars to IT servers to online games to any other service) would benefit from charging their customers by the minute or by the second, even. Typically, utilities (electricity, water, internet, ...) could also be very well adjusted to micro-payments : instead of paying a monthly fee for a general bandwidth (used or not), kilowatts of power or cubic meters of water, or one down payment, payment channels would allow you to pay exactly as per your usage, at the moment of usage : if you do not need Internet for a week (you're on holidays for instance), you wouldn't be charged for it.
Coupling the power of blockchain technologies such as Bitcoin Cash with the micro-payments channels as conceptualized in LN could well open host of new possibilities, giving the ability for customers and merchants to adjust their rates by the smallest increment available to them, and to create new markets that we can barely imagine now.
It goes even further since it gives the "Internet Of Things" a workable financial environment where small appliances would be able to exchange information, power, action on their environment and probably more, based on micro-transaction, probably tens of them by the second in some cases.
Definitely, the market for such transactions is simply too huge to be ignored and in any case, Bitcoin Cash is a strong contender for its implementation.
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