Bitcoin becomes the main currency? Two-layer network such as Lightning Network is essential!

Over the past few months, the Bitcoin community has been debating what the purpose of the Bitcoin network is. Is it meant to be a global settlement network? Or should it be used as a store of value asset like gold and handle large sums of money?

Bitcoin is best described as a peer-to-peer digital currency. In the official white paper of the Bitcoin network, Bitcoin creator Satoshi Nakamoto described it as an electronic cash system for making payments without the involvement of middlemen or financial institutions.

The transaction memory pool continues to grow

Processing transactions in a peer-to-peer network without mediators, network administrators, and third-party participants is extremely difficult, costly, and technically challenging, which is why Bitcoin requires an open source developer community to maintain its network codebase.

Bitcoin is still in the early stages of development and adoption. True Bitcoin anonymity has not yet been given to Bitcoin users, and scalability is still an issue that developers in the Bitcoin open source community need to solve urgently.

Currently, Bitcoin is operating as a kind of digital gold. The average transaction fee is about $0.32 per transaction, and each transaction currently takes at least an hour to be verified. Due to the limited block size of the Bitcoin network and the growing transaction memory pool, the traditional transaction approval system based on 6 miner confirmations has been delayed.

Consensus is needed

If Bitcoin wants to become a major global currency, then like other technologies, Bitcoin needs to move beyond its current stage of development and solve scalability, flexibility and anonymity. As mentioned earlier, the complexity of the Bitcoin network requires developers to develop a cautious approach to network expansion, because reckless solutions will either split the Bitcoin network in two or cause serious security issues that are difficult to solve in the future.

When cash first appeared in the United States, it was tied to the value of gold. The first commodity used as the basis for the entire monetary system in the United States was gold, and then a convenient cash system was deployed based on this commodity.

Two-tier Bitcoin network

The first layer of the Bitcoin network can be thought of as the gold of the U.S. cash system. This first layer provides the infrastructure for a settlement network that allows users to process transactions easily and efficiently.

Using the first layer of the Bitcoin network, it is very difficult and expensive to process transactions. However, as the first layer begins to scale and second layer solutions like the Lightning Network are introduced, Bitcoin payment costs will become lower and micropayments will be introduced to the Bitcoin network.

Roger Ver, a well-known Bitcoin investor known as "Bitcoin Jesus", has always emphasized that if "the usefulness of Bitcoin as cash is destroyed, its value will also be destroyed", so the Bitcoin community and industry should not regard Bitcoin as digital gold but as a settlement system.

The fact is that the Bitcoin network currently resembles the structure of digital gold. However, as Bitcoin's underlying blockchain technology continues to develop, Bitcoin will become both a settlement network and digital gold.

Experts in the digital currency industry and other active investors, including Capital One senior vice president Alan Silbert and Bitcoin gold exchange Vaultoro CEO Joshua Scigala, believe that Bitcoin can be both digital gold and a settlement network based on user suitability. If investors want to buy Bitcoin to protect the property of funds and obtain an asset that has stability and increases in value over time, then Bitcoin can be used as digital gold.

Users of some e-commerce platforms, such as Purse, might use bitcoin to make purchases, such as electronics, or food, such as coffee at a local store, in which case the bitcoin network becomes a settlement system.

Once these technical issues are resolved, Bitcoin’s volatility will fall, and mainstream users will start to treat Bitcoin like cash and use it in their daily lives, thus making Bitcoin a major digital currency.