Research has recently been published about some glaring vulnerabilities in the  Network, which is the second layer protocol built on top of BTC to overcome the inherent shortcomings of the small block BTC network on the practicality of the protocol being used as a cash or micropayments system. 

The paper published by researchers at the University of Illinois revealed two major attack vulnerabilities endemic in the system, which could be used to inconvenience users by locking them from their money or steal funds outright.

The Lightning Network (LN) was conceived in 2016 as a possible alternative solution to Bitcoin scaling for those that were opposed to just returning the protocol to the original state of having an unbounded block size. To those that believed that keeping the block size restricted at 1MB maximum was essential to preserving the decentralized nature of the protocol, this was a welcome alternative. LN promised a scaling solution that instead put 90% of the transactions off-chain, onto a Layer 2 protocol which did not require the base ledger for transactions, so long as an initial setup of ‘coin lockup’ transactions were made in advance, in what they call payment channels. 

Much like how you have to preload your debit card with bank transfers or charge up your Starbucks coffee card before you can use it for a purchase, one must lock up your BTC into channels before using it on LN. But unlike your debit or Starbucks card, LN is even a bit more complicated than that. That is because your channels are bidirectional, meaning that you can’t just deposit your locked funds into an account that you can use universally, later on, you actually have to open a channel with a specific counterpart, company, or person. 

In our example, it would be like charging your Starbucks card with Starbucks, but unlike a debit card. Why? Well, your debit card can be used to pay anyone that accepts VISA or Mastercard. 

Your Starbucks card can only be used to buy coffee from Starbucks. So the difference is the scope of usage available to you depending on who you decide to open up payment channels with. Because LN allows for payment channels to be chained together, a user Alice, who has a channel opened with Bob, who has a channel open with Charlie, will be able to effectively pay Charlie through Bob seamlessly. At least in theory. But reality rarely works out like the theory.