In that summer of 2020, how you wished someone could tell you exactly what DeFi is, what liquidity mining is, and what TVL means. Seeing friends' assets multiply several times in just a few months made you feel both familiar and strange. Familiar because of those friends you used to boast with in the group, strange because of the ways your friends were making money. At that moment, the FOMO emotion peaked, and you could only shout in the group asking which big brother could guide you, starting to think whether you should join a paid group to learn. In fact, at that time, you had already completely become a '韭菜' (chives), unable to escape the fate of being harvested.
Four years later, when you recall that past, how you wish to travel back to the spring of 2020, when you had already understood all the relevant terms and general principles of DeFi. It’s hard to imagine how ambitious you were back then, but unfortunately, that summer has long passed. In the remaining two months of 2024, all you can do is lament the passage of time. However, Trump's reelection has introduced more variables to the crypto scene. Although it cannot take you back to the summer of 2020, there is indeed a chance to create an entirely new era of crypto, which I would like to call the Summer of Lightning.
The wheels of fate may have already started turning frantically by the time you read this article!
What is the Summer of Lightning
During this election campaign, 78-year-old Trump used Bitcoin to treat everyone present to burgers at the cryptocurrency-themed bar PubKey in Manhattan, New York. After successful payment, Trump said the transaction was very simple, fast, and good, and behind this praise is the main character of today’s introduction, the Lightning Network, which makes buying burgers with Bitcoin a fast and simple task.
The Lightning Network is not a brand new concept; on the contrary, it has matured over time. Since the birth of Bitcoin, it has attracted global attention. However, as the number of users increases, the Bitcoin network faces issues of slow transaction speeds and high fees. To solve these problems, the Lightning Network was born. It is a 'second layer' payment protocol built on the Bitcoin blockchain. It aims to achieve instant, low-cost micropayment transactions without recording every transaction on the Bitcoin main chain. The Lightning Network allows users to conduct multiple transactions by creating payment channels, and only the final results are recorded on the blockchain when the channels are closed. Imagine Trump and Musk frequently having beers together. In traditional Bitcoin transactions, every time Trump treats Musk to a beer, he needs to make a transaction on the blockchain, which not only requires a long waiting time for confirmation but also incurs miner fees. With the Lightning Network, Trump and Musk can do this:
First, open the payment channel
Trump and Musk decided to open a Lightning Network payment channel. Trump deposited the equivalent of $100 in Bitcoin into this channel. This operation will be recorded on the Bitcoin blockchain.
After multiple transactions
On the first day, Trump treated Musk to a $5 beer. In the Lightning Network, they only need to update the channel status: Trump has a balance of $95, and Musk has $5. The next day, Musk invited Trump for a $3 beer in return. They simply need to update the channel status again: Trump has $98, and Musk has $2. This process can continue many times without having to interact with the Bitcoin main chain each time.
Finally close the channel
When Trump and Musk decide to end this payment channel, they will submit the final balance state to the Bitcoin blockchain. For example, if the final state is Trump $98, Musk $2, then only this transaction will be recorded on the blockchain.
During this process, Trump and Musk may have invited each other for beers hundreds or even thousands of times, but only two transactions were recorded on the Bitcoin blockchain: opening the channel and closing the channel. This greatly reduces the burden on the blockchain, increases transaction speed, and lowers transaction fees. It is evident that the advantages of the Lightning Network are instant transactions, which can be completed in milliseconds without waiting for block confirmations. Low fees, as most transactions are not directly recorded on the blockchain, significantly reduce transaction costs. Scalability: The Lightning Network can handle a large number of micropayments without increasing the burden on the blockchain. Privacy protection: Only the opening and closing of the channel are recorded on the public blockchain, while the transaction details in between can remain private.
However, the clever you can also see that there are some problems that need to be solved in the operation of the Lightning Network. First is the technical complexity. For ordinary users, creating invoices when using the Lightning Network may not be intuitive and simple enough; it is somewhat different from the existing blockchain transfer methods, and invoices all have time limits. Even if Trump praises the Lightning Network for its speed and convenience, the actual operation of treating someone to a payment was still assisted by his aides. The second major issue is that liquidity also restricts the popularity of the Lightning Network. Users need to lock a certain amount of Bitcoin in the payment channels, which raises another issue: the routing problem of the Lightning Network. Finding the optimal payment path in a complex network is still a challenge.
CKB version of 'Lightning Network' - CFN
Just as DeFi unleashed its true power after encountering AMM, the Lightning Network is also waiting for its own AMM.
The Fiber Network is the next generation public Lightning Network based on CKB and off-chain channels, abbreviated as CFN. In addition to having a series of advantages that the traditional Bitcoin Lightning Network possesses, CFN also has several key new features compared to the Lightning Network: 1. It not only supports Bitcoin but is no longer limited to a single currency, paving the way for complex cross-chain financial applications. 2. Based on CKB's Turing-complete smart contracts, it supports more complex condition executions and business logic. 3. Natively designed to support interactions with Lightning Networks on other UTXO chains. 4. Thanks to CKB's Cell model, CFN can manage channel states more efficiently. In addition to new features, CFN also combines the Lightning Network with DePIN, using DePIN devices to further solve liquidity issues in the Lightning Network. CFN may really become the AMM of the Lightning Network.
