Human societies have greatly evolved since the first ancient people who settled the Nile and Indus River Valley began to engage in a crude barter system. At present, the barter system is no longer the norm when exchanging goods, and we now have elaborate and highly sophisticated social systems with huge financial institutions like central banks.
The establishment of central banks—whose tasks include management of the state’s currency, interest rates, money supply, and overseeing various commercial banking systems—is definitely a recent development within contemporary human societies, having been initiated only a century ago. These national central banks now monopolize the management of state’s currencies by putting a cap on the amount of currencies in circulation.
Yet, despite these myriad advantages concomitant with the establishment of central banking systems around the world, the central banking system is obviously fraught with limitations and disadvantages. Moreover, it is still not the best system pragmatically. It also has plenty of critics who really want to abolish its overarching control over national economies. Hence, many financial pundits are still trying to figure out a better system—a currency system—that would eliminate the monopoly of central banks.
Due to this demand for demonopolization, cryptocurrency was born, and Bitcoin became the very first cryptocurrency and the very first decentralized digital currency. Cryptocurrency is definitely free of the control of the central banks, and as such, it is truly decentralized. You can exchange Bitcoins for other currencies, products, or services, and the number of users of cryptocurrency wallets is definitely increasing.
Bitcoin has all the characteristics of a currency such as fungibility, which means that all its units must be identical and can be interchanged; scarcity, which means it has limited supply; durability, which means it could survive and retain its value for a long period; transferability, which means it can be traded between people; and divisibility, which means it can be fractionalized or broken into smaller units.
What is a Cryptocurrency Wallet?
A cryptocurrency wallet usually stores all the necessary information for transacting Bitcoins. It is that in which the digital credentials about your Bitcoin holdings are stored. You can access your wallets and consequently spend them, although a Bitcoin network can only block, on average, every ten minutes.
What is the Lightning Network?
One of the most promising scaling solutions for Bitcoin is the Lightning Network. But what is the lightning network? The Lightning Network allows you to make instant payments and lets you process thousands of different transactions per second. With the Lightning Network, you can engage in multiple transactions and instant payments without necessarily being limited by the ten-minute blocking system. Its very backbone is the Multiple Signature (MultiSig) wallets that are somewhat similar to regular crypto wallets, save for the fact that these wallets necessitate multiple people’s signatures to send a particular transaction.
Discussing the intricacies of Lightning Network may require another article; but let it suffice to enumerate the benefits concomitant with Lightning Transactions, namely: instant payments, scalability or the ability to increase the number of transactions per second, low cost advantage, and the possibility of cross blockchains or cross-chain atomic swaps.