Bitcoin scalability issues

• Bitcoin can process only 7 transactions per second

• This is too low compared to Visa (which can take up to 24000 transactions per second)

• You have to wait ~10 minutes to make sure the transaction went through (which is fast if you are buying a 400k house, but really slow if you are buying groceries)

Lightning network to the rescue

• The Bitcoin Lightning network aims to solve the main chain scalability network by providing a sidechain solution

• It provides scalability by not record every transaction on the main chain

• Instead, it creates channels between parties (if necessary) and records a transaction on the main chain if on of the two parties closes the channel

Lightning Network

(source: Wikipedia)

Disadvantages

• Both parties need to be online to send/receive funds

• Less secure and more centralized                   

Ricardian contracts

• "Wet" code vs "dry" code                          

• Ricardian contracts are both machine-readable and legally binding

(source: 101blockchains.com)

Current use cases

• OpenBazaar - decentralized marketplace that uses Ricardian Contracts to record trades 

• "Unlimited" loans without colleteral that have to be repaid in the same transaction

• Provides low-risk high-reward opportunities for an arbitrage

Flash Loans

(source: hackingdistributed.com)

Flash Loan Arbitrage example

(source: finematics.com)

Flash Loan Arbitrage tool

(source: furucombo.com)