Blockchain: Technical advances

Blockchain: Technical advances

Lightning Network

The Lightning Network (LN) allows participants to transfer BTC among themselves using their digital wallets for free. A second layer is added to the Bitcoin network to enable transactions between parties outside the blockchain, known as off-chain. Transactions. A second layer increases performance without compromising the security or decentralization features of the original blockchain. The Lightning Network creates payment channels between two users in a distributed database, allowing them to transact with each other without all other users getting their information, thereby defining off-chain transactions. It is considered a game changer in the cryptocurrency world as it was designed to speed up transaction processing and reduce the associated costs of the Bitcoin blockchain. It was conceived in 2015 and will be further developed and activated.

However, researchers have warned that as the Lightning Network grows, it will become a more attractive target for attackers. Bitcoin in the evolving payment network could be stolen if users aren’t careful, and it could be challenging to ensure future asset security. According to experts from the Hebrew University of Jerusalem, the attackers could plunder Bitcoin, which is currently locked in the payment channel Lightning Network and is now worth about $9 million worth of Bitcoin. Although an error has the potential to become serious, researchers are optimistic that it can be fixed in the long term.

SegWit

Segregated Witness or SegWit refers to a process change in how Bitcoin manages transaction data on the blockchain. To segregate means to separate, and the witnesses are the signatures of the transactions. It was created to overhaul how data is stored on the Bitcoin blockchain. This allows the network to execute more transactions in a single block, improving transaction performance. SegWit was activated on Bitcoin in August 2017 after the upgrade code was released in 2015.

SegWit increases a blockchain’s block size limit by removing signature data from the bitcoin transactions. If parts of a transaction are deleted, they free up memory and can add more transactions to the chain. 

SegWit not only improved the speed of Bitcoin transaction processing but also fixed a vulnerability in the protocol that allowed nodes to manipulate transaction deformability issues (TXIDs) on the network. By removing so-called “signature data” or “witness data.”” from a block’s input field, Segwit increased the number of transactions that could fit in a block and fixed the transaction malleability bug. It is a backward-compatible upgrade that allows upgraded nodes to communicate with non-upgraded nodes. A soft branch usually contains a new rule that does not conflict with the existing ones. However, due to the high cost of running a node (especially in developing countries), the upgrade was discontinued on November 8, 2017.

Taproot

Bitcoin Core developer Greg Maxwell proposed the Taproot extension in January 2018. The criterion of 90% mined blocks with a supporting signal from miners was met three years later, on June 12, 2021. This means that 1,815 of the 2,016 blocks mined in total over the two weeks, miners left behind some encrypted data to show their support for the upgrade. Taproot is a soft fork that enhances Bitcoin scripts to improve privacy and increase network anonymity. If a user is not using Taproot, anyone can see transactions.

One of the most significant changes to the network is replacing Schnorr signatures with Bitcoin’s current Elliptic Curve Digital Signature (ECDSA) technique. The ECDSA technique generates public keys from randomly generated private keys, making it impossible to determine a private key. A bitcoin address or public key. In addition, the Schnorr company will free up storage space and bandwidth on the Bitcoin network by making transactions faster and smaller. By enabling discrete record contracts (DLCs), Schnorr can help simplify complex, intelligent contracts on the Bitcoin blockchain. The DLCs propose adding a smart contract implementation to Bitcoin, allowing for the creation of simple, secure, and user-friendly blockchain oracles. It can also help scale Layer two payment channels like the Lightning Network, which enables instant transactions on the Bitcoin network.

The limitations of the blockchain although blockchain has many advantages, like everything, it has its disadvantages. The first is that the blockchain can slow down when too many users are on the network. It is also more difficult to scale due to its consensus method. Another limitation is that the data is immutable within the blockchain. You can’t change the previous block once it’s written. Some may see it as a self-managing copy, meaning users must manage their wallets, or they may lose access. The major limitation is that blockchain technology is still immature. In addition, it does not offer interoperability with other blockchains and financial systems and is difficult to integrate with legacy systems.

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