Hi, does the Interledger Protocol solve/ fix the issue with bitcoin transactions running so slow? If so, does bitcoin really need the lighting network? Thanks
We think of Bitcoin as a “Layer 1” network. It is the core of Bitcoin value transfer. As such it’s slow but very safe and secure.
Lightning is a “Layer 2” network. It improves the speed of transactions using Bitcoin so that payments can be made in real-time.
However, “Layer 2” networks are generally still constrained to a single currency and this is where Interledger (a “Layer 3” network) comes in.
It provides internetworking between the various layer 2 networks.
Lightning attempts to solve a number of problems that are also solved by ILP like addressability and multi-hop so there is some redundancy if you use ILP over Lightning.
I think a better long term solution for using Bitcoin for faster payments will be ILP over Bitcoin payment channels but without the routing and privacy preserving features of Lightning. (Not because I don’t think the privacy preserving things are not important but because I think they can be achieved differently)
“The transaction processing capacity maximum is estimated between 3.3 and 7 transactions per second.”
If the layer one protocol is hamstrung nothing happening at later two/above matters.
Another way of thinking about this is using the analogy of the existing card payment network.
At the point of sale, no money actually changes hands. The merchant requests and receives authorization to eventually get money from the card tendered and so allows the customer to leave with their purchase.
Over the next day or so the transaction is settled - funds are deducted from the customer’s ‘open-to-buy’ (available credit) and the card issuer transfers funds to the merchant.
Lightning network provides that same promise to settle but at much higher speeds than the underlying blockchain.
Essentially, lightning network splits transaction from settlement.
ILP, in my understanding in the case of Bitcoin, does essentially the same thing.
Neither can affect the speed of the underlying blockchain.