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Lightning Network

Lightning Network: The Lightning Network is an off-chain payment solution layered on Bitcoin, utilizing Lightning Channels and Hashed Timelock Contracts (HTLCs) for secure and efficient transactions.

HTLCs (Hashed Timelock Contracts): HTLCs are cryptographic contracts ensuring secure payments on the Lightning Network. They impose a time limit (timelock) and use cryptographic hashing for transparent fund transfers.

Lightning Channels: These channels facilitate bi-directional payments within the Lightning Network, allowing participants to transact without on-chain confirmation. This enhances scalability and efficiency.

Bi-directional Payment Channels: These channels permit payments in both directions, enabling any peer on the Lightning Network to transact with another, even without a direct channel.

Off-Chain Transactions: Lightning Network’s off-chain transactions offer a scalable solution to Bitcoin’s on-chain scalability issues, enabling faster and cost-effective micropayments.

Micropayment Channels: Integral to the Lightning Network, micropayment channels efficiently handle small transactions, contributing to the scalability of the Bitcoin blockchain.

Scalability Solution: The Lightning Network acts as a second layer for Bitcoin, addressing scalability concerns by utilizing micropayment channels and off-chain transactions.

Peer-to-Peer Payment Channels: These channels facilitate direct transactions between peers on the Lightning Network, promoting a decentralized and interconnected payment network.

Network Formation: The Lightning Network fosters a dynamic and interconnected network, allowing participants to transact with any other peer, enhancing overall usability.

Channel Capacity: Channel capacity denotes the maximum amount of cryptocurrency transactable within a Lightning Channel, influencing liquidity and usability.

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