Is the Bitcoin Lightning Network Private? What does this mean for the future of Bitcoin and all of its holders? Speed is certainly one very promising aspect of the new Bitcoin Lightning Network but how about privacy?
Many might have heard about this – that Bitcoin is a Surveillance Coin. This means that EACH TIME you make a transaction with Bitcoin every transaction is recorded on its blockchain.
For anyone new to Crypto this might not seem like a problem. After all most people have bank accounts and each transaction is recorded by the bank. However, many that trade Crypto do so because of the extra freedom.
Yet, this is a growing concern. The very thing that Bitcoin was created for is no more.
It might sound like justice is being served but in all fairness, this goes well beyond what is right. The very reason why Bitcoin was created was for anonymity and now it has become the very thing it was made not to be.
For instance, if somebody does well Investing in Bitcoin and doesn’t declare it to the taxman (or woman) no longer can they keep this information private.
Bitcoins Public Ledger can be used to track all of your activity for your BTC address from the very beginning.
If the taxman (or woman) wants to they can investigate you through your personal information saved on the Blockchain. What’s worse much of your earnings from your investment you will be ordered to pay back through court.
Just one of the many reasons that the lightning network is potentially about to change Bitcoin transactions for the better.
Is the Bitcoin Lightning Network Private? TOC
Now, this is a very good question and one that anybody that values their privacy will surely want to know the answer to…
Does The Lightning Network Make Bitcoin a Privacy Coin?
If you have been reading about bitcoin for the last year then maybe you have heard about the Bitcoin Lightning Network. This for anyone new is an off-chain method of completing Bitcoin transactions. It essentially is a virtual credit provider that is used to complete Bitcoin transactions much faster.
Privacy is not really why the Bitcoin Lightning Network was created for. The time it takes to process a transaction on the blockchain is why LN was created. However, people have been trying to decide if this new method of transacting makes LN good for privacy.
This is because the main way that the bitcoin lightning network transacts anonymously is through something called a tumbler or a mixer. A tumbler takes bitcoin from many different users and ends up mixing the coins together in one big pot. The result is that the origin of the coins becomes difficult to trace and impossible with some mixers.
The Lightning Network is growing at an exponential pace if you can’t tell by looking at the trust node page on the LN project website. The number of open channels has hit an all-time high, with over 10 million dollars in capacity currently online. The network itself has a higher capacity right now than all other cryptocurrency networks (except for BTC).
In this article, we’re going to explore what privacy options are available and identify ways that the LN protocol could make potentially Bitcoin a truly fungible cryptocurrency.
What is the Bitcoin Lightning Network?
The lightning network is a second layer on top of the bitcoin blockchain that facilitates faster transactions and lowers fees by operating primarily off-chain.
The lightning network is currently the only viable solution for scaling bitcoin to accommodate more users.
LN is simply a way to transact more efficiently, allowing more transactions per second with lower fees, all while keeping your coins secure on the bitcoin blockchain.
Lightning users can buy anything they want (a cup of coffee, a house, a car) instantly with very low fees. Plus, In terms of Privacy transactions these are no longer directly saved on the public ledger.
However, does this really make LN completely private compared to actual privacy coins this is the question…
I will circle back to this question soon but just in case you are wondering.
How Does The Bitcoin Lightning Network Work?
The Bitcoin Lightning Network (LN2) works by using something called a hash lock, which is a cryptographic key that allows users to access their funds. In order to make the process more secure, there are multiple layers of keys that must be entered in order for someone to gain access to the funds on their channel.
The Lightning Network itself is not a new technology but rather an extension of bitcoin’s existing architecture. It uses multi-signature addresses, which allow two parties to sign transactions with their private keys instead of just one.
This creates more privacy because it means there isn’t just one person who knows where your money went or what was done with it after leaving their hands.
How To Use Lightning Network?
Before you start using the lightning network, you will need to ensure that your bitcoin wallet is compatible with it.
Some wallets will have integrated support for the bitcoin lightning network, but most users will need to add support for the technology through a plugin.
As of now only a hand full of companies are currently compatible but certainly this is sure to change over the next couple of years. For any situation where the Bitcoin Lightning Network is available here is how it works.
Firstly, open up your bitcoin wallet and make sure it is fully synced with the bitcoin network.
It may take a little while for this to complete, so be patient.
After that, download the Boltzmann application and install it on your computer. This is an advanced piece of software that allows you to use the lightning network.
Open up Boltzmann and follow the setup instructions. Eventually, you will come across a unique payment code which you will need to copy into your bitcoin wallet.
Input this code in your wallet’s settings and save any changes made there as well.
Now you should be fully connected to the lightning network! You can now send and receive payments via the lightning network in real-time, with very low fees and almost no waiting time at all.
What Does LN Mean for the Future of Bitcoin?
The Lightning Network, a proposed upgrade to the Bitcoin blockchain, will speed up transactions and lower fees while making them more private. This is a significant development for proponents of anonymity in cryptocurrency.
The Bitcoin Lightning Network is a technology upgrade that allows many payments to be made off-chain. To a casual observer, it might appear that your Bitcoin wallet balance increased with each transaction you make on the Lightning Network. But in reality, your balance remained stable, and only the difference between your previous balance and your new one was transferred.
The Lightning Network makes it possible to use Bitcoin for small purchases like coffee or an online subscription at no cost (or close to it). That’s because the Lightning Network allows off-chain transactions that don’t require miners to verify each transaction on the blockchain. Every time you make a payment on the Lightning Network, it’s as though you’re sending money from one of your own wallets to another.
Lightning Network Vs. Monero
Besides the elephant in the room, which is whether the Bitcoin Lightning Network is private or not. Another question that those of us that value our finacial anonymity must be asking is what this means for the likes of Monero (XMR) and Pirate Chain (ARR). How will Monero and other Privacy coins stand out if there is a seamless privacy solution provivide by a much more utilized blockchain (Bitcoin)?
The Bitcoin lightning network offers privacy via anonymous transactions away from the L1 BTC blockchain. This is what for a lot of people is so exciting about it can we trust it long term?
There was a time when Bitcoin offered anonymity and we all know what happened here. Bitcoin SV is actually a spin off of Bitcoin, a fork of Bitcoin Cash based off of Bitcoins original programming. This is one coin that could really rival the likes of Monero and Pirate Chain except that both these cryptocurrencies are more advanced than Bitcoin ever was or will be.
Bitcoin SV and Bitcoin Lightning network are great solutions for stealth. Which in theory is not just the future for cryptocurrencies but it is the future of money. However, Monero and other coins take this a step further exactly why the Bitcoin Lightning Network as great as it is still does not compare.
Raphael Laverde On Bitcoin Lightning Network, Monero and Pirate Chain
Thread on Reddit about BTC LN Network + Monero
I do not believe the lightning network makes bitcoin a privacy coin. The unique trait of Bitcoin is its censorship resistance. The lightning network facilitates this trait by drastically decreasing the cost to transact on the main chain and thus increases the profitability of running a fully validating full node.
The lightning network facilitates the ability to send transactions via LN with routing nodes and then broadcast them on-chain at a later date. Without this, it’s possible for an adversary to deanonymize a transaction by monitoring all the transactions on-chain. This is how blockchain analysis companies like Chainalysis operate.
The LN will increase the fungibility of bitcoin because there will be more transactions happening off-chain. This will reduce the amount of information that can be gathered about on-chain transactions, but I do not believe it makes bitcoin a privacy coin because it does not have built-in privacy like Monero or Pirate Chain.
But what do you think?
Share Your Feedback Below…
What are your thoughts on the Bitcoin Lightning Network, the need for financial anonymity and privacy coins such as Monero (XMR) Please let us know along with any questions you have in the comments below;
Please Like, Share and Subscribe x
To Your Future Success With Crypto
Alex B. Chivers