Charlie Lee, the inventor of Litecoin, has put forth his ideas for Bitcoin/Litecoin (BTC/LTC) atomic exchanges and Lightning networks in order to seamlessly take loads off the ever more expensive Bitcoin network and share them with the underused but still very valuable Litecoin network, which has at least four times the nominal network capacity of Bitcoin.
A Lightning network is the creation of a payment channel between two nodes through trusted intermediaries. An nLockTime (timelocked) refund transaction provides the proof-of-stake or the guarantee of the Bitcoin (or Litecoin) involved. Parties can exchange, off-blockchain, fully valid Bitcoin transactions until either their stake is depleted, the time runs out or an intermediary disappears, in which any user can fall back on the blockchain for settlement.
Lightning promises to drastically cut Bitcoin transaction fees, which now stand at a not inconsiderable 0.17 cents per transaction for one that should clear within the next block.
An atomic exchange is where the BTC/LTC transaction happens instantaneously without the need for an intermediate holding stage. This has already been demonstrated as feasible on the Bitcoin blockchain.
Lee, who goes by the Twitter handle @SatoshiLite, pointed out to Disruptive.Asia that while Lightning would drastically increase network capacity, the Lightning nodes would still ultimately charge a fee based on the Bitcoin transaction fee. By having interconnected Lightning networks – whereby everyone has BTC and LTC stakes pledged in each network’s Lightning networks and atomic exchanges – it would be possible for Litecoin Lightning to seamlessly take the load off Bitcoin Lightning.
“The problem is that people want to only hold Bitcoin and the networks are not interconnected. Lightning networks will fix this,” he tweeted.
None of this can happen until Lightning networks go live, and Lightning cannot happen until the infamous transaction malleability bug is fixed with Segregated Witness (SegWit).
SegWit-capable software was introduced to the Bitcoin network with Bitcoin Core 0.13.1 last October, and is now supported by over a quarter of Bitcoin miners.
Photo by btckeychain 
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