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– Payment channels similar to the Lightning Network on the Bitcoin (BTC) network will be implemented on Cardano (ADA) thanks to a new state channel architecture called Cardano Lightning.

The system is currently in the pre-launch phase; details were revealed on August 24 during a Cardano community livestream featuring PolyCrypto software engineer Ilya von Hössel.

Essentially, Cardano Lightning consists of two-way payment channels that allow two parties to send and receive transactions directly. More specifically, each party can close the channel at any time without jeopardizing the other partys funds.

Bitcoin itself is slow but reliable. Ideally, wed like to temporarily move it to other blockchains for trading, use as collateral, and so on, while maintaining the security that Bitcoin provides. And Lightning means you can ensure security while maintaining high speed and minimal or zero fees, noted von Hösle.

The true power of this solution lies in combining these channels into a single network and routing payments through multiple participants without the need for a direct channel between the sender and the recipient.

What is Cardano Lightning?

As von Hössle further explained, Cardano Lightning is based on the Lightning Development Kit (LDK)a ready-to-use software development kit (SDK) that provides the functionality required to create and configure Lightning nodes. More specifically, Cardano Lightning is based on a fork of the LDK Node, which allows it to leverage a mature codebase and its flexibility.

In addition to the LDK, the developers have implemented two key elements: a Rust-based relay that simplifies interaction and coordination within the Lightning network, and a Cardano smart contract that acts as a liquidity manager for the network.

The LDK node is an excellent codebase that is very well supported You have plenty of customization options when setting up your own Lightning nodes as you see fit, he added.

Together, these components form the foundation for the operation of Lightning nodes and the management of the liquidity needed to support Lightning transactions on the network. As a result, Cardano Lightning can enable fast and low-cost payments through a network of linked channels, while simultaneously extending the reach of individual payment channels beyond directly connected parties.

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