The development of Bitcoin into a more scalable version has been considered by researchers. The plan to increase the payments channel scheme was thought that it would accommodate more users.
Thus, researchers have considered the development of Lightning Network. Although it has not pushed live yet onto the blockchain, proponents of this idea have thought that it should be a way to boost the transaction capacity of Bitcoin without increasing its block size.
Adding Another Layer
However, in order to do it, researchers have found it necessary to add another layer. This has been envisioned to be in between Lightning and the Bitcoin blockchain. Thus, they thought that this would overcome the existing limits of Lightning.
The suspension of the Segwit2x hard fork, after it was proposed to increase its Bitcoin block size parameter to 2MB, has triggered researchers to find a more convenient option. In fact, they have argued that the limit may have somewhat been defined by the Bitcoin blockchain itself, capping at 1MB. So, it can’t possibly support Lightning’s infinite channels.
Currently, Lightning functions as a channel that users open with another user via regular blockchain transaction. When established, both users can make off-blockchain transactions using the initial value they put into the channel.
The proposal was to use “hook transactions” that would move the funds into multi-party channels supporting 2 or more users. This was called the “channel factory”, which allows 2 people in a multi-party channel to begin a separate channel inside the main channel.
Thus, users are able to open and close channels a number of times without even making an on-chain transaction. That would be done without going back to the blockchain and without incurring any transaction fees. Thus, it would lead to the reduction in cost, which compares to the people inside the multi-party channel. For example, a hundred-person group would result to a 90% cost reduction, in comparison to a hundred traditional payment channels.