Ethereum: Allows the SEGWIT side chain such as lightning network, fractional reserve?
When the world of decentralized finances (Defi) develops, several side chains have appeared that promise to increase the functionality and usability of different blockchain networks. One such side chain is the original side chain of the Ethereum Network, which has recently gained considerable attention. Specifically, I am talking about side -based side chains like a lightning network.
What are segwit and side chains?
Before you dive into this topic, it is necessary to understand two basic concepts:
- Segwit allows more efficient and scalable validation processes.
- Side chains
: The side string is a parallel, an independent blockchain network that can be used for specific purposes or to enable new applications. Side chains offer several advantages over traditional main networks, including increased scalability, faster transaction processing times and improved safety.
Lightning network: Side chain Defi
Craig Wright, an Australian entrepreneur for Lightning Network (LN), has largely discussed his vision of a decentralized financial system without a permission that uses blockchain technology. LN is an open source side chain that allows fast, cheap and safe payments among users without the need for intermediaries.
LN uses a segregated witness (segwit) to verify transactions, which improves the validation rate of transaction and reduces the risk of 51% of attacks. This feature has significant consequences for Defi applications, including platforms of loans, loans and shops.
Fractional reserve banking
Let’s now discuss how the side chain as Lightning Network can make fractional reserve banking easier:
* Fractional Reserve : In traditional banking systems, deposits are usually produced in full units (eg $ 100), while the bank has only a fraction of this amount in the reserve. This practice ensures liquidity and reduces the risk of banks.
* Fractional reserve banking on Blockchain
networks: The side chain as Lightning Network can allow fractional reserve banking by allowing users to store funds in smaller amounts while maintaining the majority in the reserve. This process is facilitated by SEGWIT, which improves the validation rate of the transaction.
In this scenario:
- Users insert small amounts of ether (ETH) or other assets into the side chain.
- The side chain will confirm these deposits using the Segwit , ensuring that the transactions are properly secured and verified.
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Advantages and restrictions
The combination of side chain, such as lightning network and fractional reserve banking, offers several benefits including:
- Increased availability of financial services
- Reduced costs associated with traditional bank infrastructure
- Improved efficiency and scalability
However, there are also limitations to consider:
* Regulatory challenges : The use of blockchain technology in Defi applications is still largely unregulated.
* Safety risks : As with any decentralized system, there is a risk of violating or using safety.
Conclusion
Finally, the combination of segwit side chains, such as the Lightning Network and Fraction Banking, offers a promising solution to improve financial services. Although there are regulatory challenges and security risks, they can be mitigated by careful planning and implementation.