Blockchain opens Thunder Network source to pave the way for instant Bitcoin transactions

Author: GTong

Blockchain, the company behind the world’s most popular Bitcoin wallet, has been quietly working on an interesting project called Thunder. Thunder is a network of alternative nodes that allows you to make off-chain Bitcoin payments in seconds and occasionally fall back to the Bitcoin Blockchain.

This sounds complicated but it’s actually pretty neat, and it could be a powerful innovation for Bitcoin transactions. But first, we need to take a step back for the sake of caution.

If you’ve ever tried to transfer some Bitcoins from one wallet to another, you know that it can take 10 or 20 minutes before the blockchain confirms the transaction.

The reason behind this is that blockchain is a network of servers that share the same transaction record. When you transfer two bitcoins, all nodes in the blockchain record the transaction, so that everyone can confirm that the original wallet has transferred the two bitcoins and the wallet to which the bitcoins were transferred has now received the two additional bitcoins.

This is amazing, and it’s what makes Bitcoin completely decentralized. But it’s also slow, hard to scale, and expensive.

Last year, Joseph Poon and Thaddeus Dryja wrote about Bitcoin’s scalability and speed issues and defined the Lightning Network. These alternative networks are supposed to run independently of the main Bitcoin blockchain and be able to register transactions within a second. The blockchain uses smart contracts, which eliminates the need for all nodes in the Lightning Network to record all transactions.

Until now, however, these were just theories. Blockchain previously hired Mats Jerratsch and started working on an implementation of the Lightning Network. That’s where the company announced today that it was open-sourcing Thunder. Thunder is the first implementation of a similar Lightning network. Blockchain has already started running Thunder nodes and other bitcoin companies can view the source code, offer Thunder wallets, adopt the network or become a fork of it. Thunder also works with other cryptocurrencies. And the startup has already conducted the first online transaction on Thunder.

While Blockchain won’t be using Thunder just yet because of the number of Blockchain wallet users, the startup is already thinking about the real-life advantages a solution like Thunder could bring.

With Thunder, transactions are so fast that the network can handle an average of 100,000 transactions per second. While Visa processes an average of 2,000 transactions per second, the Visa network is capable of handling 56,000 transactions per second.

If you put this into perspective, Blockchain wallet users are on track to make 40 million transactions this year, or about 1.3 transactions per second. This is a very impressive number, but to be honest, even though Blockchain is the most popular wallet maker and there are many other wallets on the market, Bitcoin transaction volume is still far behind Visa. The reason for this is that Bitcoin transactions are too cumbersome. So I believe projects like Thunder can be part of the solution.

Just as importantly, Bitcoin transactions are much cheaper because of Thunder. When you return a Thunder transaction to the Bitcoin blockchain, there are blockchain fees involved. But you can do many Thunder transactions before returning to the blockchain, and Thunder transactions don't involve so many nodes. If you spread the fees across the number of Thunder transactions, it becomes much cheaper to pay with Bitcoin. With transaction fees so cheap, you can finally imagine doing "microtransactions" with Bitcoin.

So Thunder can make Bitcoin an alternative to Visa. It removes many of the limitations behind the existing Bitcoin protocol.

However, there are still some obstacles. Thunder can't yet work with anyone using a Bitcoin wallet because the Bitcoin core development team needs to release the segregated witness and CHECKSEQUENCEVERIFY features once. But the good news is that these features are on the roadmap and the core team wants to make the Lightning Network possible. Until then, Thunder still needs to rely on trusted nodes. But with future Bitcoin updates, Thunder can become a full-fledged Lightning Network.

Thunder is an exciting project that could revolutionize some of Bitcoin's use cases. Due to Bitcoin's limitations, many have turned to alternative cryptocurrencies like Ether. Slowly but surely, the Bitcoin community is catching up, and Bitcoin payments are becoming more attractive.

JPM compiled from

Techcrunch, Blockchain Open Sources Thunder Network, Paving the Way for Instant Bitcoin Transactions, by Romain Dillet.