Ultimate Resource For Lightning Network Updates (#GotBitcoin)
The Lightning Network Is Going To Change How You Think About Bitcoin. Ultimate Resource For Lightning Network Updates (#GotBitcoin)
The vote wasn’t close. In early June, 62 of the 84 members of El Salvador’s Legislative Assembly – a whopping 74% – voted to make bitcoin official legal tender. “History!” tweeted Nayib Bukele, the bitcoin-happy president of El Salvador. He’s not wrong.
The nation’s stunning embrace of crypto, regardless of what happens next, is arguably the most influential event in bitcoin’s history.
“Against-All-Odds” is a tower defense game, where you take the role of a cybersecurity expert to fight against hackers and other blockchain threats in this cypherpunk interactive fiction. Combined with squad customization, base/tower building, and simulation. Defend the blockchain!
Satoshis Games: Is a gaming platform that allows you to earn bitcoin by playing games.
MintGox is a brand new style of esports tournament. Games become more engaging and rewarding when virtual currency is added, so we went ahead and did just that! Now you can earn Bitcoin, tip streamers, even powerup your favourite players! Welcome to the future of esports!
The ZEBEDEE wallet is your bridge into virtual economies. It is a Bitcoin Lightning wallet made specifically to connect with games. It comes with a unique gamertag. This is like your ID for payments in virtual worlds. Use it to send and receive transactions.
Look Closer. This didn’t happen because El Salvador farmers are hoping their Blockfolio balances will go “to the moon.” This wasn’t fueled by dreams of a BTC index fund. This wasn’t about price speculation.
In a nation with a 70% cash economy, villagers and farmers are actually using bitcoin, sending small amounts of satoshis (or “sats”) to buy fruits and vegetables, embracing the original peer-to-peer vision of bitcoin that would make the actual Satoshi smile.
For this, we can thank the Strike app, from Jack Mallers, which makes it fast and cheap and easy to send and receive tiny amounts of bitcoin. Now look even closer. Strike, in turn, is powered by the Lightning Network, which crypto-geeks know as the “layer 2” protocol that basically settles transactions “off-chain,” through a growing network of user-hosted channels and nodes, that exponentially cuts down the time and fees to send bitcoin.
Mallers always knew he’d use Lightning to fuel Strike. “It was painfully obvious,” Mallers tells me, calling Lightning’s layer 2 solution “one of the more impressive advancements in money as a technology in human history.”
Lightning is the engine that’s driving this burst of bitcoin adoption. And you could make a good case that the Lightning Network is the most important project for the most important asset in all of blockchain. Yet the actual team that’s building Lightning, led by CEO and co-founder Elizabeth Stark, is almost oddly off the radar.
Lightning even somehow feels … underrated? After early spurts of publicity in 2017 and 2018 (such as Leigh Cuen’s Bitcoin’s Warrior Queen profile for CoinDesk, or the Lightning Torch experiment of 2019), Stark has generally avoided the press, burying herself in the work.
This could be the perfect moment for Lightning to re-enter center stage. The recent discourse of Bitcoin, as measured by headlines or crypto twitter, feels like a never-ending torrent of price, price, price, Elon Musk, price, China, price, price, Elon Musk. The Lightning Network, in a sense, is the antidote to all that speculation frenzy. Lightning is about bitcoin being used, not just gobbled up by investors, and not just as digital gold.
“The idea that it’s merely a digital rock fails to tap into the very nature of what bitcoin can do,” says Stark. “Bitcoin is programmable money, and Lightning can help scale it to billions of people across the world.”
And now it’s actually starting to happen. Stark and her team have a message for the globe: Lightning is no longer just about “potential.” It’s no longer just the future. Lightning is here. And it’s working.
I first heard about the Lightning Network in a Bitcoin meetup in Chiang Mai, Thailand, in the spring of 2018, when a couple of bitcoin developers gave a wonky and nearly indecipherable presentation that showed a visualization of the network itself – it looked halfway like a stunning Jackson Pollock painting and halfway like pure gibberish. Their speech was filled with talk of channels and nodes. This was the future of bitcoin?
Much has changed. “Lightning is a reality now,” says Desiree Dickerson, Lightning Labs’ vice president of operations, whose low-key genius-background includes a smattering of endocrinology, biophysics, geneticsand helping the government launch the Affordable Care Act (which made her disenchanted with the government). “People say it’s two years out. It’s really not.
There are applications where you don’t have to think about nodes … I use Lightning every single day.”
Lightning is fast. Very fast. According to Dickerson, Lightning currently has a maximum throughput of 25 million transactions per second (compared with on-chain’s throughput of seven transactions per second), and it expects that to increase as the network grows; she says that Lightning Network settlement is instant, instead of taking 10 to 60 minutes on-chain.
That changes what it means to use bitcoin. For much of the bull run, the idea of bitcoin embracing its role as a “store of value” seemed almost a fait accompli. Lightning’s response? Not so fast. “Lightning is going to transform the way people interact with and use bitcoin,” says Dickerson. “It’s not just, ‘Yay, the number went up, I made a 100x gain on my investment.’ It’s going to be like, ‘Oh shit, you can actually transact and use this?’”
Let’s start with the operation itself. Given its importance to the blockchain space, I had assumed that the headcount of Lightning Labs numbered in the hundreds, with platoons of developers cranking out code. There are just 21 employees total.
“People are always shocked by that,” Dickerson says. The team is almost entirely remote, scattered across cities that range from San Francisco to D.C. to New York.
Lightning Has One Modest Overarching Goal: Get 1 billion people using bitcoin within the next decade. (An estimated 46 million Americans own bitcoin, but very few actually transact with it.) How to spur adoption? From a U.S. perspective, the most obvious approach is to inject Lightning into the typical crypto onramps – Coinbase, Robin Hood, Cash App.
The Cash App would seem like a slam dunk, given that it’s helmed by bitcoin bull (and Lightning Labs investor) Jack Dorsey, who, over two years ago, predicted that Lightning integration with the Cash App was a question of “when, not if.”
There have been few (if any) updates on a potential integration since then, and on our call, Stark demurred from elaborating. But more recently, Dorsey suggested that it’s a “only a matter of time” until Lightning is integrated into Twitter itself.
“Lightning Is A Reality Now”
Then there’s the more creative, less obvious path to adoption. This is the one that happens in the background. Lightning is focused on building tools for developers, betting that they will, in turn, create engaging apps that people will want to use. “You can be extremely high impact when you’re building out tools for developers,” Stark says.
“In terms of Lightning Labs’ mission, we are building this internet-native digital payment transaction layer. We’re building the infrastructure to make that possible.”
Strike is the poster child of this strategy. It took less than 90 seconds for me to set up Strike on my phone, including downloading it from the App Store and linking it to my checking account. It was the easiest crypto on-ramp I’ve ever seen.
“There’s a fiat on-ramp directly to Lightning. That’s huge,” says Ryan Gentry, a former Intel engineer who heads up Lightning’s business development. “That really changes the game.”
Here’s why all of this matters. In one of Stark’s favorite analogies (she loves analogies), many years ago, if you were lucky enough to live in a wealthy nation, or perhaps near a university or a large city, you had easy access to libraries and books. “But if you were living in a small town in El Salvador, you could not access these books,” she says. “The internet democratized that, and made it so anyone can access information.” Stark doesn’t care about the price of bitcoin; she cares about the tech’s ability to unlock the doors of “libraries” – financial inclusion – for the rest of humanity.
For years, bitcoin advocates have argued that the cryptocurrency could help “bank the unbanked” and bring financial inclusion to an estimated 1.7 billion people. But to invoke a trusty “Seinfeld” reference, they often yada-yada-yadaed over how we actually get there. Lightning could be the yada yada. “What is the end result of this internet-native value layer? It opens up opportunities for far more people who wouldn’t have had them otherwise,” Stark says.
In a Lightning Clubhouse chat on May 19, Alex Gladstein, chief strategy officer of the Human Rights Foundation, notes that 1.2 billion people in the world live in places that have double- or triple-digit inflation and that the problem is more sweeping than just the usual go-to example of Venezuela.
“You’ve got Nigeria with 15% official inflation, and that’s 210 million people,” Gladstein says. He ticks off more stats: Turkey (100 million people, 15% inflation), Argentina (45 million people, 50% inflation), Pakistan (200 million people, 10% inflation).
In a penetrating piece for Bitcoin Magazine, Gladstein makes the case that bitcoin, fueled by Lightning, is actively being used in these countries to help people live better lives.
One of his examples is Kal Kassa, from Ethiopia, whom I speak with as well. Kassa runs a marketing firm, and he uses Lightning to pay people for graphic design, programming, translations and helping run his content management system.“The moment they send that invoice and I send the Lightning, it takes less than a second.
They’re amazed,” Kassa tells me. He enjoys using Lightning and helping people learn the tech, just for the hell of it. A 17-year-old kid in Ethiopia, for example, doesn’t have a laptop, and so he can’t really help Kassa in any meaningful way. “What he does is he’ll send me a joke,” Kassa says. “And if I haven’t heard the joke before, I’ll send him 500 sats.”
Then there’s the flip side to this coin. In the U.S. and other parts of the economically advantaged world, we often talk about spending bitcoin. Gentry considers this to be a “predominantly Western perspective,” and that in developing economies, he sees more interest in earning bitcoin. “And the easiest way to earn bitcoin is through the Lightning wallet,” Gentry says.
Take gamers. People hooked on certain games don’t just waste away their time; now they’re “stacking sats” with Lightning.
Dickerson, who has been into gaming for years (she loves Zelda), sees this as one of the most promising use cases, and also a way to fix an overlooked inequity.
“User-generated content is extremely valuable for game publishers,” Dickerson says. “Why aren’t they [users] getting paid?” Now instead of just racking up high scores or winning a pot of imaginary gold, when gamers slay dragons, they can haul in a stack of sats.
At the “MintGox” E-Sports Arena at the Bitcoin 2021 conference, the gaming tournament was powered by Lightning. Or in games from Zebedee, for example, you can choose to enter a “Deathmatch” or “Survival Mode,” and the financial stakes are real. “In ‘Survival Mode,’ your sats are your life,” explains Zebedee. “When you score, you get extra life. When you die, you lose some life. If you run out of sats, you get kicked from the server.”
More Lightning use cases: The app Fold lets you load up an account with a credit card or bank account, and then you earn sats (via Lightning) as a rewards program. I tried it. It’s super easy, and then they “gamify” the app by letting you spin a wheel every day to win some sats.
I spun and won 873 sats, which sounds way more exciting than the actual value of about 30 cents. Stak lets you perform online micro-tasks (such translation or image labeling) to earn sats; the site claims to have 19,000 active workers. OpenNode helps merchants use Lightning to accept bitcoin payments, and they were ubiquitous at Bitcoin 2021.
“One consistent theme of the conference was the maturity of the Lightning Network,” CNBC reporter MacKenzie Sigalos discovered. “Virtually every booth at the conference was accepting Lightning transactions.” BlueWallet makes an easy Lightning wallet. More crypto exchanges such as OKEx, Kraken and Bitfinex are integrating Lightning. The full list goes on for a while.
(Gentry says there are more than 150 companies building on Lightning.)
Many of these use cases help people in poorer nations “earn sats.” I notice that Gentry and Dickerson like to use the phrase “earn sats” instead of “earn bitcoin,” and the wording seems intentional. Gentry explains that the typical Lightning wallet would approximate what you would keep in your fiat wallet, and it’s rare you would see somebody hold more than 1 million sats, or $500.
Focusing on sats, not BTC, is also a tacit nod to Lightning’s global appeal. “There are countries where sats are equal to the lowest denomination,” Gentry says. The Iranian rial, for instance, is worth around $.000024 USD, and so the value of 1 satoshi (at the time of publication) is around 13 Iranian rial. Or the value of 1 satoshi is 7 Vietnamese dong. “I talk to people every day whose assumptions about bitcoin and money are very, very different from ours,” Gentry says.
All of this integration takes time. Gentry says that while the goal is to get bitcoin into the hands of 1 billion people within a decade, “it could easily happen much faster than that.”
One reason the timeline is tricky to predict – besides the inherent uncertainty of bitcoin – is Lightning’s strategy of focusing on developers. “So much of what we’re doing is building the infrastructure to allow start-ups – the Zebedees, the Strikes, the Blue Wallets – to go out and get the users,” Gentry says. “It’s not really up to us to define those timelines. All we can do is build the protocol, the nodes, and help build the network.”
And that network itself takes time to grow. “What I see at Lightning, I see a telecommunication network, or something on the scale of telephone wires or fiber lines,” Gentry says. The Lightning team runs only a handful of its 10,000 nodes; everything else is organic and beyond their control.
“Because this is true, organic, real, decentralized growth, this is going to take a while,” he says. “But because this is a true network … it’s not something that can go away. It’s only going to grow and become more entrenched.”
This might be true, but for all the work they’ve accomplished, the actual guts of the Lightning Network can still seem a bit opaque, especially for newbies. The in-house products that Lightning has built, such as Pool and Loop, will likely perplex a casual reader. Take the Lightning newsletter and the “get started with LND [Lightning Network Daemon]” section. It includes these bullets:
* What Makes A Good Routing Node * Optimal Configuration Of A Routing Node * Managing Lightning Liquidity * Dealing With Unconfirmed Transactions * Secure Your Lightning Network Node.
There is zero chance that my parents, say, would have any idea what this means. Stark et al. know it’s an issue. “The end user shouldn’t have to know about channels,” agrees Stark, who has long said that sending bitcoin over Lightning, eventually, should be as dead-simple as sending a photo over a text. She likens the current state of bitcoin to the early days of the internet.
While Stark is not the first to make that analogy, she’s been remarkably consistent, tweeting way back in 2014, a full two years before launching Lightning: “#Bitcoin as protocol has huge potential: it’s like the TCP layer, but no one has built the HTTP layer yet.” Lightning’s role is to breathe life into that user-friendly HTTP layer, making it so that sending bitcoin just works.
“My vision of the future is that there’s no distinction between bitcoin and Lightning,” says Dickerson. “Lightning is a network for transferring bitcoin. So it is bitcoin.” Another way to think about it, Stark says, is that the Lightning hot wallet will function as a checking account, with bitcoin in cold storage for your long-term HODLing.
What will Lightning unlock in the future? “There are so many use cases we haven’t even thought of yet,” Stark says. But they have thought of plenty, and a big one is micropayments.
“I get viscerally angry whenever I hit a paywall on the web, or asking me to subscribe to a newsletter,” Gentry says. “This is a solved problem. I can set up a Lightning node and pay you 10 cents. You don’t need my credit card information. You don’t need my email address. All you need is a couple of sats from me.”
Payments are only part of the story. The Lightning Network does more than just provide a way to zap sats from one user to another – the very network itself could be harnessed for other purposes. Dickerson is excited about a new project called Impervious AI, in beta, which builds a “layer 3” network that can be used to set up decentralized virtual private networks (VPNs), messaging platforms, or even streaming videos or DJs or podcasts. “I can be in China, or I can be in Iran, and this allows us to speak freely without censorship,” explains Chase Perkins, Impervious’ founder and CEO.
Most people think of the “peer to peer” network of bitcoin as being 1-to-1, but Perkins says that what “blows people’s minds” is that peer-to-peer can also mean 1-to-50 or 1-to-10,000. This is possible with Lightning. “People tend to think that peer-to-peer is not scalable. It is,” he says. The monetary routes of Lightning can be piggybacked to create decentralized versions of Telegram, Signal or VPNs.
This is a similar approach employed by Sphinx, a chat app that uses the payment rails of Lightning to send text messages that are free from censorship or corporate oversight. “Text messages are not routed through the regular internet,” explains Gentry. “It’s data flowing through pipes of money.” And instead of simply pressing Send to fire off a message, users can just click to send 1,000 sats. “When people hear this they’re like, ‘Oh, this is what bitcoin can be? I had no idea.”
“I’m not spending my life so that billionaires can manipulate things, or so that rich people can get richer.”
It’s possible the average user doesn’t really care about privacy, censorship resistance or freedom from centralized corporations. But this could be changing. A 2019 survey from Cisco found that 84% of respondents cared about data privacy, and 80% were willing to spend more time and money to protect their data. Apple now features “privacy” as a hot new feature, as if it were a new Johnny Ive design.
Or if online privacy still feels too abstract, take the recent example of a very different Apple, Apple Daily, Hong Kong’s pro-democracy newspaper, which was effectively shut down by China. In an internet powered by Lightning, Impervious AI would make a publication like this, well, impervious to that kind of political pressure. As Gladstein tweeted after the crackdown, “This is why Bitcoin is important for free speech and democracy.”
Ultimately, it’s possible that Lightning could help unshackle the internet from its ad-driven, corporate-sponsored Frankenstein of a framework. “Right now on the internet, we have an advertising-based model that tracks users, and takes a lot of information,” Stark says. “It’s not healthy, and it doesn’t have to be that way.”
Lightning could help enable Self-Sovereign Identity, or SSID. As I explored in a deep dive last year, SSID on the internet, more or less, means that you could log into websites or pay online merchants without having to spill your personal details like your address, date of birth, or credit card information.
But how would that actually work? When I spoke with the experts last year, virtually everyone agreed that SSID was crucial, but there was a lack of clarity on how, exactly, it would actually come about. Enter Lightning.
“Lightning has the potential to serve as the de facto payment method to access services and resources on the web,” Lightning’s co-founder and chief technology officer, Olaoluwa Osuntokun, said in a post on the project’s blog. “In this new web, rather than a user being tracked across the web with invisible pixels to serve invasive ads, or users needing to give away their emails subjecting themselves to a lifetime of spam and tracking, what if a user were able to pay for a service and in the process obtain a ticket/receipt which can be used for future authentication and access?”
In this new framework, as Gentry explains it, a technology called LSATs, or “Lightning Service Authentication Tokens,” would be a new standard protocol for authentication and paid APIs that “strongly decouple authentication and payment logic from application logic.” In English? A user would use the Lightning Network to buy an LSAT token, and then spend that token when logging into a given website.
No credit card info needs to be shared. It’s sort of like at an amusement park when you buy, well, tokens to use when you play Skee-Ball. Gentry says this should not require any dramatic change in user behavior, as “instead of a password manager and a credit card, you’ll need an LSAT manager inside your LN wallet.” This might all sound a little far-fetched, but then so did, at one point, the idea of El Salvador using Lightning to accept bitcoin.
Then there’s the role of Bitcoin the Network. Stark says that with the herd mentality of what she calls the NGU crowd, or those who only care about the bitcoin price or the “Number Going Up,” people get fixated on “bitcoin the asset. But Bitcoin, the monetary network, is extremely powerful. They both go hand in hand.”
Stark likes to reference Metcalfe’s Law, which states that “the value of a telecommunications network is proportional to the square of the number of connected users of the system,” and which means that as each new user joins the network, the network’s value increases exponentially. “Lightning supercharges the network effect,” Stark says. “It brings in so many more people and enables them to transact.“ (A thoughtful essay by Lyn Alden drives home the point.)
In the world Stark envisions, bitcoin is not only an asset but also the network, and it can be the rails on which you send some other cryptocurrency. “It doesn’t always need to be the unit of account,” Stark says. “It’s a transport layer…It’s basically the way you can send money.” This also happens to address one of the oft-cited concerns about bitcoin’s utility as anything other than a store of value: if it’s so damn valuable, why would you spend it?
Or maybe Lightning will be used not just by humans, but by computers. Crypto junkies will be familiar with the talking point that bitcoin banks the unbanked. But Stark pushes the concept further with the idea of unbanked computers, and the potential of machine-to-machine transactions. “100% of all machines are unbanked, but they can hold value and they can transact,” she says . Why couldn’t the OS of a Tesla, when it’s time to top off its energy, simply zap some sats to the charging station? (A prototype of this already exists.)
And finally, perhaps the most exciting aspect of Lightning is that it has almost nothing to do with the price of Bitcoin. One of Stark’s mantras is to think not about the “Number Going Up,” but the “Number of People Going Up.” Global adoption is her endgame, not laser eyes.
We first spoke on May 18, about a week after the price of bitcoin tumbled from $60k. Stark seemed almost relieved. “I love bear markets,” she says. “It’s a great time to build. It’s less distracting.” She tries to tune out the noise, the price action, and even the antics of hyper-tweeting billionaires. She’s wary of Elon Musk.
“This is a technology to empower people…to improve the internet, to make it a better place…It’s not some billionaire’s playground,” she said shortly after Musk’s tweets rattled the price. “Elon can buy a bitcoin. Elon can tweet about it. Elon can sell bitcoin. That is all fine. It is open to all. Nobody needs permission to take part in that, and that is part of why this technology is so powerful,” she says. “But I do think this obsession on one individual is also problematic.”
After all, says Stark, Bitcoin’s lack of a top-down leader is a feature, not a bug. “The fact that Satoshi disappeared is one of the best things to ever happen to bitcoin,” she says. “We are all Satoshi.” She pauses. “Except for Craig Wright.” She laughs.
Stark keeps the ultimate goal in mind. “I’m not spending my life so that billionaires can manipulate things, or so that rich people can get richer,” she says. “I’m spending my life so that a billion people will have access to this technology, which will drastically improve their lives and improve their world.”
She would soon sharpen this argument into what might be her defining ethos: “Bitcoin for billions, not billionaires.”
The Lightning Network on Bitcoin passed a fresh milestone this week, taking its overall capacity to over 600 BTC ($2 million) for the first time.
Data from monitoring resource 1ML.com confirmed the achievement, which occurred early January 30. Lightning Network Reaches Marathon 600 BTC Capacity (#GotBitcoin?)
1 YEAR, $2 MILLION
The previous day proved to be particularly successful for the Bitcoin mainnet Lightning implementation, capacity growing by 21 BTC in 24 hours. Now with a total capacity of 601 BTC ($2,053,000), Lightning has added 15 percent over the past month.
Other metrics also showed improvements. The total node count now sits at 5768, the equivalent of a 16 percent monthly rise, while there are now 22,750 channels – 36 percent more than a month ago.
The news coincides with the increasing adoption of the technology. As Bitcoinistreported, an ongoing awareness campaign, Lightning Torch, aims to pass a transaction around the network, with each user adding to its size.
Beyond community-initiated projects, bonafide user-ready apps continue to bridge the gap between Lightning’s technical beginnings and mainstream understanding of its uses.
Bitcoinistreleased a two-part guide to the emerging ecosystem this week.
Lightning’s technical improvements go beyond bolstering Bitcoin’s ability to scale to meet the requirements of a significant influx of future users.
As Bitcoinistrevealed this week, faster, cheaper transactions mean Lightning allows Bitcoin to become more effective than some altcoins designed to replace it.
Even with its limited reach, Lightning still processes more payments than altcoins at payments service Bitrefill, the company’s CEO said.
Taking Lightning to an altogether different audience this month meanwhile was Coin Center, which demonstrated the technology to the US Congress in the form of micro-transactions. The demo was made as part of a wider presentation on cryptocurrency by the group at the Congressional Blockchain Caucus.
“We were able to show the process of sending tiny amounts of bitcoin from our phones to the vending machine and watch it dispense candy in real time. The network fees were 1 satoshi per transaction,” Coin Center wrote in a follow-up blog post.
What Do You Think About The Lightning Network’s Capacity Increase?
Bitcoin’s Dropping Lightning Capacity Might Not Be a Bad Thing
The lightning network is supposed to be bitcoin’s superhero, taking the cryptocurrency to new heights by tackling its toughest and most obvious problem: if cryptocurrency is ever going to “go mainstream,” it needs to support a million times more transactions than it currently does – which is no easy feat.
But by the looks of this graph, lightning appears to be losing momentum. The amount of funds locked up in the layer-two network looks to be decreasing, seeming to indicate that fewer people are using it as a payment method. A lightning “channel” is like a gateway to the rest of the network, allowing a user to send a payment to any other user.
While lightning is still considered “beta” software, and thus risky to use, bitcoiners have been so enthusiastic about it and using it anyway, for games and beyond, chanting the unofficial slogan “reckless.” As lightning’s capacity increased rapidly over its first year, devotees cheered it on social media.
The catch is that, while this number is decreasing, lightning use might actually still be increasing because of increased privacy of lightning channels and other channel optimizations.
“There’s no way of knowing the capacity in [the lightning network]. We can only know the public channels’ capacity, not private,” Roy Sheinfeld, CEO of Breez told CoinDesk.
And at least one company says that – at least in their experience – lightning payments are picking up.
“We are doing increasing dollar value volumes on the lightning network. What I am seeing is the price going up and thus people need less coins locked up in channels to maintain spending power,” FastBitcoins MD Danny Brewster told CoinDesk.
A Tale Of Two Nodes
So, while so far watching this number has been a spectator sport — football for tech geeks — it might not be for much longer. This number will grow harder to track over time.
That’s because many lightning wallets do not advertise whether their channels exist to the rest of the network, by default.
Under the hood, there are “advertised” channels which advertise their existence to the rest of the lightning network and “non-advertised” channels which don’t. Normal channels, used by everyday users who just want to buy pizza and draw dicks online with lightning, don’t need to be advertised.
“Many wallets in the past few months have been released which default to non-advertised channels, these channels don’t show up on any public metrics, so relying on the public metrics alone only really shows half of the picture,” Lightning Labs CTO Laolu Osuntokun told CoinDesk.
Generally, advertised channels only need to be used by routing nodes, so the sturdier nodes that get payments from one person to another and need to be online all the time.
Zap creator Jack Mallers argued “it’s only responsible” that “anyone who isn’t a routing node [uses] private [“non-advertised”] channels.”
Some go as far as to argue that the public capacity is a “useless indicator” because it doesn’t capture all – or maybe even most – of the money in the lightning network.
Because more apps have been starting to follow these best practices, Sheinfeld guesses that “most” channels are private, noting that his wallet Breez has opened “thousands” of private channels just in the last couple of months alone.
“Breez opened thousands of private channels in the last two months. Lightning Labs auto-pilot also opens private channels,” he said.
This is one reason why many developers see lightning as providing more privacy than on-chain bitcoin transactions. While bitcoin has a reputation for giving users anonymity, transactions are actually public. Lightning hides a bit more of the transaction details.
“If a regular bitcoin transaction is similar to uploading your bank statement to a public web site, a lightning network transaction is similar to showing each merchant you pay how much money you have in one specific compartment of your wallet. You’re still revealing some information, but much less,” as lightning startup SuredBits wrote.
Another reason the capacity is decreasing is because some entities are closing down lightning channels that were wasteful.
“Based on my knowledge, the decrease in channels is simply node operators being rational by closing out channels that have been open for some time, but which don’t have notable forwarding activity,” Osuntokun said.
For instance, there’s one famous and mysterious anonymous lightning user by the name of LNBIG who has opened many lightning channels. They initially debuted by pouring 300 bitcoin into the lightning network, giving new meaning to lightning’s “reckless” catchphrase.
“At the beginning of my activity, I opened many channels in the hope that they will be used (and due to the imperfection of the autopilot),” the person behind LNBIG told CoinDesk.
But, the secretive developer said, those channels weren’t really used much at all. They were just open and sitting there.
“But time has shown that many channels have not been used once for two to four months, for example, and the funds in them are nonetheless blocked,” LNBIG continued.
The funds are “blocked,” as LNBIG puts it, because of the way lightning works. A lightning “channel” is like a gateway to the rest of the network, allowing a user to send a payment to any other user. But when someone opens a “channel” with someone else and doesn’t use it, then other people can’t use that gateway.
So, it makes sense to free up that capacity and wait to see if a new channel opens want to use the capacity, which is exactly what LNBIG decided to do.
LNBIG posted a Twitter poll before following through with closing these channels, arguing that the only downside would be the “psychological effect” that lightning’s capacity would fall down to 825 bitcoin.
As the decrease in lightning’s capacity shows, Twitter encouraged LNBIG to follow through.
Bitfinex Allows Lightning Network Shopping on Bitrefill With Bitcoin
Cryptocurrency exchange Bitfinex and crypto store Bitrefill partnered to allow the trading platform’s clients to shop with Bitcoin (BTC) over the Lightning Network.
According to a press release published on Dec. 4, Bitfinex users can instantly pay for a variety of services with Bitcoin that they hold on the exchange as of today.
A Lightning B2B Settlement System
Per the press release, the companies attribute the development to the “world’s first dynamic B2B settlement process over the Lightning Network.” The announcement builds on recent news that Bitfinex enabled Bitcoin Lightning Network transactions and that those using it for deposits and withdrawals will pay almost no fees. The companies explained that setting up such a system required some tinkering:
“Bitfinex and Bitrefill utilize customized versions of Lightning to open large channels together, exceeding the default limits in place, but allowing better flow and reliability to users.”
The collaboration between the two firms will allow the exchange’s customers to buy over 2,000 different prepaid vouchers with Bitcoin. The vouchers can cover the costs of services and products relevant to gaming, dining, entertainment, travel and more.
Lightning Adoption By Exchanges Is Essential
When Bitfinex users buy products from Bitrefill, the system put in place by the two firms instantly settles the payments over Lightning Network. Bitrefill chief commercial officer John Carvalho explained why he believes Lightning adoption among exchanges is important and where he thinks it will lead:
“We believe that getting Bitcoin exchanges on to the Lightning Network early is integral to preparing for the next wave of adoption and building out a parallel economy for Bitcoin. […] We will continue to work closely with Bitfinex and other businesses to develop Lightning solutions and products that make living on crypto a reality, eventually removing dependability on fiat rails.”
The Lightning Network sees increasing traction and adoption in the cryptocurrency space, with many placing high hopes on its potential to make Bitcoin a viable payment tool.
As Cointelegraph reported last month, bond market veteran Nik Bhatia says that Lightning Network convinced him of Bitcoin’s potential. Also in November, Bitcoin payments app Fold rolled out support for home-sharing giant Airbnb, effectively enabling to book stays included in the service with Lightning Network.
‘Multi-Part’ Payments Could Bring Bigger Bitcoin Sums To Lightning Network
Bitcoin tech startup Blockstream said its c-lightning software team is the first to release a working version of “multi-part payments.”
While the name, c-lightning v0.8.0, is a mouthful, it’s a big improvement for the user experience of the lightning network, a new layer that’s probably bitcoin’s best shot at scaling to support a larger number of payments. The change updates the plumbing of lightning network payments so users can send larger lightning payments, with a much smaller risk of them failing.
“The user experience of lightning clients is a topic that is brought up often, and we are working actively on improving the status quo, together with the teams working on other lightning implementations. Our goal is to make using lightning as easy as using an on-chain wallet,” lightning developer Christian Decker explains in a blog post.
Right now, it’s not as easy. For one thing, there’s a chance there won’t be enough liquidity in the network to support the transaction, especially for larger payments. Say a user sends 0.5 bitcoin across the network. Under the hood, it bounces from one node to the next until it reaches its destination. Each of those nodes needs to have 0.5 bitcoins that it can pass on to the next node.
If one of the nodes in the path doesn’t have enough bitcoin, the user is out of luck and the payment fails.
Multi-part payments tackle this problem by making it possible to break a payment into smaller pieces that are easier to send across the network, since a user can combine bitcoin from multiple channels they have open to send payments.
“Multi-part payments allow a lightning node to bundle the capacity in all its channels when making a payment, making larger payments than any individual channel on its own would allow,” Decker writes. “This greatly reduces the headache of managing how many channels to open, and how to allocate funds to them, since you can now simply combine them as and when necessary.”
Notably, while this release supports sending these types of payments, it still isn’t possible to receive them. That functionality is still being worked on.
Decker claims the code change also “greatly increases” the resiliency of the entire payment network. Since users sending payments are less likely to have to transact with a large node, that’s a “single point of failure.”
“The capacity of the largest channel used to be the limiting factor when performing payments. As such, users were incentivised to open a single channel, with as many funds as possible, to a node that was as stable as possible. This led to users rating the reliability of nodes before opening a channel with them, since that node would now be their single point of failure, i.e., if that node was down, they couldn’t do much. With multi-part payments, users can now open multiple channels to multiple nodes, while at the same time being sure that the funds will be there when they need it. For the network, this means more connectivity and better resilience against the threat of big nodes suddenly disappearing.”
Blockstream says the technology will be expanded upon in future releases.
Privacy And Scalability of Lightning Network Lower Than Expected: Report
Researchers from cryptocurrency exchange BitMEX have suggested that the privacy and scalability benefits of Bitcoin’s (BTC) implementation of the Lightning Network are less than expected.
A report published by BitMEX on Jan. 11 illustrates the researchers’ efforts to determine the growth of the Lightning Network by trying to extrapolate information about private payment channels from readily available data.
The team focused on non-cooperative channel closures and they suggest that — since the network started its activity — about 60,000 such transactions took place.
A non-cooperative channel closure happens when a Lightning Network node initiates the closure of a payment channel without directly communicating with the node that the channel is linked to.
Non-cooperative Channel Closures More Prevalent Than Expected
Non-cooperative channel closures are more easily tracked and recognized, and they have to be confirmed in blocks on the blockchain. Due to these characteristics, BitMEX researchers drew the following conclusion from the higher-than-anticipated number of such transactions:
“The fact that non-cooperative closures are more common than many thought, means the privacy and scalability benefits of lightning are lower than many expected too. However, […] as users learn more about how to use the lightning network and lightning wallets improve, the prevalence of non-cooperative closures could fall.”
The report notes that researchers initially expected to find 30,000 non-cooperative channel closures but instead discovered the aforementioned 60,000. More liberal estimates place the number of such closures at over 90,000, cumulatively spending 1,405 BTC.
Lightning Attacks Are Rare
The report also explains that in some instances, non-cooperative channel closures see a party attempt to steal the funds, which is called a breach closure. A breach closure can be followed by a penalty transaction if the attempted theft is detected and the other party claims all the funds. Attempts to steal funds in such ways are quite rare, according to the report:
“Our analysis shows that these penalty transactions are very rare. Only 0.30% of non-cooperative closures result in a penalty transaction or 0.22% by value.”
The Lightning Network, while promising according to many, is still largely experimental. As Cointelegraph reported in early December 2019, a Redditor “lost” four Bitcoins on the Lightning Network and later published advice based on his experience. He also suggested that users interested in the system should thoroughly research how the system works before using it to send significant amounts of Bitcoin.
Still, Lightning’s promise of nearly-feeless instant transactions has the approval of many in the cryptocurrency community. In November 2019, bond market veteran Nik Bhatia said that with Lightning, Bitcoin has become an unprecedented asset by combining a store of value with medium-of-exchange scale and speed.
Grasping Lightning: Mapping The Key Players In Bitcoin’s Next Phase
You might have heard of bitcoin’s “lightning network,” but don’t know what’s going on with it right now. Who are the mysterious big players behind this magical technology that allegedly solves all of bitcoin’s problems?
Lightning is one of the most promising technologies in the space right now, even drawing in Square and Twitter CEO Jack Dorsey. Given current technical constraints, blockchains don’t support many users, let alone the world’s population. Lightning could multiply the transactions possible, while making transactions faster (like a millisecond) and cheaper.
Nerds have eagerly been putting the technology to the test. A range of lightning games have come out, such as one channeling the hit game Fortnite. And it’s possible to buy Domino’s pizza and Amazon gift cards with this new internet money.
But, while yes, lightning sort of works, there’s a lot of work to be done. The technology is still risky and not easy to use. Although the theory’s there, how it plays out in practice remains to be seen.
Here’s a breakdown of the big players across the globe tinkering with the underlying technology every day, trying to improve it so it doesn’t “suck” anymore.
Bringing The Idea To Life
The lowest-level coders are working on so-called lightning implementations, the code which puts the payment network into practice. Each has its own approach to the network.
The best-known of these is LND, created by Lightning Labs, with CEO Elizabeth Stark at the helm. Dorsey invested in the firm early in 2018.
Behind-the-scenes, there are many more developers, working on implementations such as Blockstream’s c-lightning and France-based Acinq’s Eclair. While the developers behind each of these softwares tend to focus on different features and they’re written in different programming languages, all three are interoperable, meaning transactions can be sent between them with no bumps.
To this day, developers from these three groups continue to hold bi-weekly IRC chats to discuss future changes to the protocol specifications.
To confuse matters further, there are still other lightning implementations on the fringe. With a decentralized payment network, anyone can make their own version.
Rust-lightning is a security-minded implementation headed by Square Crypto engineer Matt Corallo, who’s been writing bitcoin code since he was a teenager. Japan-based startup Nayuta has built a lightning implementation specifically geared toward the Internet of Things.
As more and more devices, whether toasters or TVs, connect to the internet and gather data, these same devices may need to make tiny payments too, to say, automatically charge an electric car, the company contends. And bitcoin’s lightning may be the only payment system in the world that allows for payments that small.
None of these coders is flashy. They put out announcements about how they’ve successfully created “multi-path payments” or “watchtowers” from time to time. While clouded in esoteric tech-speak, these announcements essentially mean that the technology is improving, and hopefully getting easier to use.
This Is All Happening In The Background. But What About Actually Using Lightning, Even If It’s Risky?
Right now it’s not easy. Most of the most-used wallets out there, such as Coinbase and Blockchain.info, don’t support lightning payments yet, because the technology is still experimental. (There are exceptions, such as Electrum, a long-standing light-client wallet which added support for lightning last year.)
For the most part, a parallel ecosystem of daredevil developers have been creating completely separate bitcoin wallets that allow users to send and receive lightning payments.
There’s a lot to choose from. Acinq’s mobile wallet Phoenix is one of the oldest and most-employed non-custodial wallets, meaning users have full control of their private keys.
Lightning desktop wallet Zap started as a one-person side project by young developer Jack Mallers. One feature of the wallet that power users love is that it hooks up with what’s known as a “bitcoin node.” This stores every on-chain bitcoin transaction made in its 11 years, the most secure way of using bitcoin. Zap lets you make lightning transactions from your smartphone, while running one of these clunky full nodes at home.
Wallets like Breez and BlueWallet are taking different approaches to building a slicker interface for lightning.
And that’s just the tip of the lighting bolt.
All this assumes the user already has bitcoin.
If they do, they can use one of these wallets to send to a lightning “channel,” like a separate specialized bitcoin account secured by a smart contract that lets you start making lightning payments.
But, if users want to buy lightning-powered bitcoins directly with USD, skipping a step, they enter a highly experimental realm.
Most other major exchanges, such as Binance, Coinbase, and Huobi, don’t have that capability yet while the technology is still maturing. BTCC, for example, told CoinDesk that “[m]ost people do not understand Lightning Network at present. We will support Lightning Network a bit later to acquire more user adoption.”
Exchange Bitfinex is the largest exchange so far to adopt lightning, meaning users can deposit or withdraw payments in the experimental form of the digital currency. But this makes up a small overall percentage of its transactions so far. Meanwhile, Breez lets users in 35 countries buy and sell lightning directly with a credit card.
While adoption across bitcoin companies is minimal for now, the goal for many of these players on the vanguard fringe of bitcoin is that once lightning is mature enough, most bitcoin wallets and exchanges will absorb it.
If UX challenges don’t get in the way, it could one day become the dominant method of bitcoin payments. It offers cheaper and faster payments after all.
App Connects Bitcoin And Lightning Payments Directly To Your Bank Account
The Strike app hopes to encourage mass adoption of Bitcoin and the Lightning Network by connecting it directly to a bank account or debit card.
Jack Mallers, the developer of the Zap Lightning Wallet, announced on Thursday his new app for iPhone, Android and Chrome, which allows users to send and receive Bitcoin (BTC) and Lightning Network payments directly from and to a bank account.
Strike, which has now entered the public beta phase, enables interaction with the Bitcoin and Lightning protocols with no wallet, seed, channels, liquidity or white papers, while Know Your Customer protocols are kept to a bare minimum.
Mallers wants Bitcoin to reach mainstream adoption. To this end, he created Zap in 2018 — one of the first desktop wallets making the features of the Lightning Network accessible through a user-friendly interface.
Furthermore, as Cointelegraph reported, last autumn Mallers announced his intent to develop a platform offering instant debit card Bitcoin purchases via the Lightning Network. Strike is the result of that work and goes some way beyond its original remit.
While Strike does let one purchase Bitcoin with a debit card or bank account, it can also be used for remittances and personal payments, micropayments and both online and offline purchases.
It also comes with a strike.me social media profile, which lets users accept free payments from anywhere in the world via an online QR code. Payments received are instantly converted into fiat.
Keep Your Confidentiality
One of Mallers’ key objectives was to meet regulations while reducing KYC and Anti-Money Laundering procedures, saying:
“The last thing I want is to introduce a new demographic of users to Bitcoin, only to have them treated as criminals as soon as they download Strike.”
Rather than accepting the commonly utilized belt and braces approach, he set about meeting lawyers and educating regulators to work out how much KYC/AML was “good enough.”
With the average payment value in the private beta being around $27, there is little need for mass collection of information and identification. Most users of the app will only need to enter a name and phone number.
Some states are excluded, and Strike will not initially be available in those regions.
Just The Beginning
Mallers has big plans for the future of Strike. There is reportedly a Strike Visa debit card in the works, along with a rewards program through partnered merchants and referrals for friends and family.
Strike has also been working to provide merchants with tools to process contactless payments, and an improved e-commerce system is also being rolled out.
Lightning Vulnerability Discovered; LND Node Operators Urged To Upgrade ASAP
A vulnerability in LND versions 0.10.x and below has been disclosed to the Lightning Labs team, according to engineer Conner Fromknecht in the Lightning Network developer channel Thursday. In light of the disclosure, the firm is urging node operators to upgrade to versions 0.11.0 or higher as soon as possible.
* No known exploitations of the vulnerability have been found to date, but “circumstances surrounding the discovery resulted in a compressed disclosure timeline,” Fromknecht said.
* The vulnerability was “partially” disclosed with a detailed publishing of the findings promised Oct. 20.
* Lightning Labs – one of three major implementations of the Lightning Network – released its newest v0.11.1-beta on Oct. 1.
* Lightning Labs did not respond immediately to a request for comment.
Bitcoin’s Lightning Network Is Getting A Marketplace For Payment Channel Liquidity
The team behind the Bitcoin Lightning Network’s leading software implementation is launching a marketplace for Lightning users to lease liquidity for payments on the second-layer network.
Today, Lightning Labs announced the release of Pool, “a non-custodial, peer-to-peer marketplace for Lightning node operators to buy and sell access to liquidity,” according to a press release.
The service will allow Lightning Network users to lend out bitcoin in payment channels in return for yield. Businesses and services providers can then draw on this liquidity when needed to manage Lightning Network payment flows.
“Efficient capital allocation is one of the most widely felt pain points when using the Lightning Network. Existing node operators do not have access to pricing signals to help determine where in the network their outbound liquidity should be allocated, and new node operators have no way to signal that they need new inbound liquidity,” the press release states.
“Lightning Pool brings these two sides together into a single market while allowing them to maintain custody of their funds.”
Pool Provides A Marketplace For Lightning Network Liquidity
Bitcoin’s Lightning Network offers cheaper, faster payments than Bitcoin’s primary network by offloading these payments onto a “second layer” (a software that is built on top of the original Bitcoin software).
Lightning manages payments through two-way payment channels, where either side holds a certain amount of the funds locked up in a channel. Sending payments outside of a channel requires a “routing” transaction. (Say Alice has a channel with Bob and Bob has a channel with Carol; if Alice wants to send a payment to Carol, she can route it through Bob.
But What Happens If Bob Doesn’t Have Enough Funds In His Channel To Complete The Payment?
This is the problem Pool wants to ameliorate. Businesses or users managing multiple channels can buy liquidity from the marketplace when they need to top off channel reserves for routing. On the other side of this transaction, Lightning Network node operators can employ their idle bitcoin by offering it up as liquidity on Pool.
“Pool adds market pricing signals to the system so that individuals know where capital is needed. Someone could go on the market and say, ‘I want 1 BTC for 1 month and I’ll pay 3%,’” Lightning Labs CTO Olaoluwa (Aka: Meatloaf) Osuntokun told CoinDesk.
Orders are matched in a “frequent batch auction.” After a window for accepting bids and asks ends, Pool’s engine matches buyers and sellers based on their rates. When the auction block clears, the payments to fund each payment channel are batched into a single transaction to save money on on-chain fees.
“Whenever you put up a bid or ask, you either get that rate or better, depending on the clearing price per batch,” Osuntokun said.
To start, payment channels will have a maximum leasing time of two weeks, or in Bitcoin time, 2016 blocks, though Osuntokun said they will diversify the leasing intervals to up to six months.
Liquidity providers will receive fees up-front on their Pool account, but Lightning Labs hopes to implement a “per block interest rate,” wherein interest is paid out instantly to a provider’s Lightning wallet roughly every ten minutes with each new Bitcoin block.
‘LiFi’: Lightning-Native Financial Services
Lightning Labs is marketing the service as a flagship for Lightning Finance or “LiFi,” a way for Bitcoiners to generate non-custodial yield on their bitcoin holdings, as opposed to lending them through a custodian like BlockFi or turning them into wrapped bitcoin for DeFi yield farming.
The service has been in a closed alpha with “many of the major exchanges, wallets, and service providers testing this in the background and to make sure it has enough liquidity on it when it launches.” The maximum order amount at launch will be 10 BTC, though Lightning Labs will raise this in the future once the platform has been sufficiently stress tested.
“In our general style of being more cautious, right now the max account size is 10 BTC. Pool is still early and this isn’t DeFi; we don’t want them depositing a million dollars from day one.”
Lightning Operators Are Bracing For A Bitcoin Bull Run
With the price of bitcoin jumping to fresh 2020 highs last month, those running the digital currency’s underlying infrastructure are pondering the consequences. Namely, the routing node operators at the heart of Bitcoin’s Lightning Network are busily bracing for the curious new users that usually come with a bull run.
Bitcoin’s Lightning Network promises faster and cheaper payments, without the occasionally crazy fees associated with the underlying Bitcoin network.
The platform is still new, in Bitcoin time, having launched for real payments in 2018. As such, it has its kinks. Developers still call using it “reckless,” because it’s new enough that it may be hiding bugs that could lead to loss of funds. Would the network be able to handle an influx of new users suddenly jumping to the Lightning Network?
Whether it can or not, those who run routing nodes are busily preparing for such a scenario.
Bitcoin Lightning “routing” nodes are the ones tasked with passing on payments through the network, until they reach their destination. Many operators of Lightning routing nodes are beefing up their nodes to make sure they can help to support a sudden increase in users.
Why Use The Lightning Network?
But first, why would Bitcoin users move to Lightning?
One word: Fees. Bitcoin fees are now higher than they’ve been in more than two years, reaching an average of $13 per transaction. With Lightning, users can avoid these fees.
“Higher bitcoin prices go hand in hand with higher transaction fees for on-chain payments,” Tudor Iova, Lightning routing node operator and founder of BTCfactura, told CoinDesk. He also noted he has seen more users tapping Lightning as fees have risen.
In contrast, Lightning payments usually cost less than a cent, making the payment method more and more attractive as fees rise.
That said, setting up a Lightning channel – a means for sending Lightning payments – requires a Bitcoin transaction. It’s kind of like a one-time setup fee for creating a Lightning account.
Say Alice puts $50 into a Lightning account and pays a $3 fee. Once that’s done, she can make as many transactions as she needs with that $50 – like 16 transactions for 16 cups of coffee.
With the Lightning Network, fees for each transaction will be negligible, averaging roughly a satoshi, worth a fraction of a cent.
Dodging Bitcoin Fees
Channels are the lifeblood of the Lightning Network. They’re also the means by which Lightning routing nodes pass along payments to others.
But, again, creating such channels requires on-chain transactions, which can be expensive when the network is congested. More transactions in the Bitcoin “mempool” – a waiting area for transactions – means higher fees.
Lightning routers are actively scouting out the best times to open channels. “We’re all watching the mempool very closely to find opportunities to open Lightning channels inexpensively as the extra space in blocks dries up completely,” said pseudonymous Lightning routing node operator Jestopher.
Jestopher expects the block space to become more scarce when (and if) a bull run commences. This happened last week, for instance, after the price shot up.
Another point routers are keeping in mind is that fees are usually lower on the weekends, when users are sending fewer transactions.
Lightning routers are busy learning and researching the best ways to tackle these issues, so that if a bunch of new users flock to the network, payments will remain smooth.
“What we are doing, and suggesting our users do, too, is to opening channels on weekends, when the fees peak off. Later, during the week, you can use Lightning payments and avoid horrendous [fees]. Else you can end up paying a fee that is higher than the price of the goods purchased,” Iova said.
Building Liquidity And Connections
Routing nodes are also open channels with a variety of peers designed to reduce failed transactions and to make the overall network more robust so payments don’t fail for users.
“We are preparing ourselves for a bull run by opening new channels and improving our Lightning node connectivity to other nodes, in order to make it possible for users to use our node Transylvania for payments and routing, when necessary,” Iova said.
The other trick is that once a Lightning channel is open, that’s not necessarily the end of the struggle. “Lightning requires lots of liquidity management, which is unfamiliar to most folks outside of Wall Street,” Jestopher said.
In short, it’s not enough to just put money into the Lightning Network; the money needs to be moved to the right spots in order for a routing node to build a path that can be used to send payments for users. Not to mention, every time a payment is made by a routing node, this liquidity is moved around. So, routing nodes need to constantly be managing where the coins are.
In fact, there’s an entire Telegram channel “LN mutual balanced channels” devoted to helping fellow Lightning users find peers and liquidity for their channels. Jestopher recently created a poll there asking fellow routing-node operators what they’re doing to prepare for a bull run.
The most votes went to “consolidating liquidity into fewer, larger channels” and “opening channels to routing peers” to build more connections with the network.
“I think the shared goal is to find out how to operate routing nodes in a sustainable way where we don’t have to clog up the mempool when it gets expensive,” Jestopher said, pointing to Lightning Loop and ThunderHub as helpful tools for boosting liquidity where needed.
Startup Lightning Labs also released a new marketplace Monday for buying and selling liquidity, an innovative way of addressing this issue.
Thousands Of New Users?
Even if many Lightning routers are preparing, some think the network is already equipped for more action.
“I think the Lightning Network is already capable enough to support thousands of new users,” Bitfinex CTO Paolo Ardoino told CoinDesk. The cryptocurrency exchange runs both the second and third largest Lightning routing nodes on the network and was one of the first exchanges to support Lightning payments.
“Spinning up new nodes and interconnecting them with others is not a very complex job, so I believe that with the growth of the user base we’ll definitely see a strengthening of the Lightning global network. I think our Lightning Network node and in general, the Lightning Network global network of routing nodes will be able to cope with an increased demand,” Ardoino added.
Iova Had A Similar View
“I think the Lightning infrastructure is a bit underestimated, and many people think it can’t cope with the traffic, [it’s] not reliable enough or it can handle only micropayments. Well, things are changing in this part of the network,” he said, pointing to public Lightning network data showing that 2020 brought in a 50% increase in the number of nodes.
Visa-backed Bitcoin Startup To Launch Lightning-Based Global Payments App
Zap is announcing Strike Global, a Bitcoin payments app for global remittances.
Zap, a Lightning Network payments startup backed by Visa through its Fintech Fast Track program, announced on Wednesday the rollout of Strike Global, a payments and remittances app using the Bitcoin layer-two technology.
An announcement by CEO Jack Mallers goes in-depth into the differences between standard fiat transfer mechanisms and the Lightning-powered mechanism in Strike Global. Mallers focused on remittances, a multibillion-dollar business that is still largely passed through expensive middlemen.
Strike Global is not too unlike traditional fintech apps, but it uses the Lightning Network for settlement. This means that payments can be essentially instantaneous and at a fraction of the cost of traditional payment rails.
Strike Global has two types of transfers, depending on the recipient’s location. For countries with a developed banking system, Strike allows users to send payments without going through Bitcoin (BTC) themselves. Strike will automatically withdraw money from the user’s bank account, exchange it into BTC, and then exchange it back into the recipient’s fiat currency and banking system.
The system largely piggybacks off the existing Bitcoin exchange infrastructure, which already allows for much cheaper, simpler remittances if users are willing to go through them manually. Since national exchanges are usually integrated with the local banking system, using Bitcoin or other cryptocurrencies allows much cheaper conversion rates compared with cross-border banking.
For countries without developed banking systems, Strike allows users to hold their money either in Bitcoin or Tether (USDT). The cryptocurrency can then be exchanged into local cash or fiat through ad-hoc solutions like Bitcoin ATMs, LocalBitcoins and others. Strike simplifies many of the exchange processes in the back end to make the experience similar to other fintech apps.
The startup partnered with Bittrex to onboard the exchange’s users on Strike and the Lightning Network. In the first quarter of 2021, it expects to complete private and public beta tests, as well as issue Strike Visa cards in the United States. In the second quarter, it expects to launch cards in the European Union and the United Kingdom.
The rollout comes as businesses begin increasing the adoption of newer Bitcoin technologies. Kraken has promised to introduce a Lightning integration in 2021, while Binance recently added SegWit address support for Bitcoin.
Bitcoin Startup Moon Brings The Lightning Network To All Visa E-Commerce Merchants
Yes, you can pay for that thing with Lightning.
A new Bitcoin-facing startup, Moon, just launched a way for its users to buy everyday goods and services using the Lightning Network at any Visa-enabled e-commerce site based in the U.S.
Shared exclusively with CoinDesk, the startup revealed the new payment option today. The Moon browser extension’s latest feature allows its users to pay for purchases using a Visa prepaid card which they purchase on the extension using Bitcoin’s Lightning Network. Once purchased, this card is immediately used as the payment option at checkout.
Upon checking out, the user employs the Moon browser extension to instantly generate a prepaid card for the exact amount of the purchase. The browser extension generates a Lightning invoice, which the user pays from any Lightning wallet. and then they can use the card to pay for the items in their cart.
These cards can only be used once, have no fees and are only available to United States users.
Moon also integrates with Coinbase so users of both can pay for the cards directly from their Coinbase accounts onchain.
The payment solution is the latest Bitcoin startup to combine traditional payment rails with Bitcoin’s Lightning Network, a bleeding-edge technology stack that facilitates instant, low-fee transactions.
“We’ve been working with the Visa Fintech team and their network of partners to build Moon. Since the vast majority of merchants don’t accept Bitcoin payments, sending payments over the Visa network is the best option due to its ubiquity,” Moon Founder and CEO Ken Kruger told CoinDesk.
“Visa has provided us with access to the Visa network, world-class expertise and the best financial partners to bring Moon’s Bitcoin payment solution to market.”
Visa Fast Track Meets Bitcoin
Over the past year, Visa has been generous with this expertise and network access to help bring Bitcoin and, more specifically, Lightning-focused business to their next phases of product development through its Fintech Fast Track program.
Notably, Visa has been involved in Jack Maller’s Strike, a Lightning Network-powered Venmo alternative that can settle cross border-payments.
The payment company has also helped Fold launch its bitcoin (BTC, -0.96%) rewards debit card. Others like eToro and BlockFi are following suit by launching their own bitcoin rewards debit and credit cards through the program.
These products can complement each other and ultimately strengthen Bitcoin’s burgeoning payments technologies.
Something like Strike, for instance, could easily be used to pay the Lightning invoice that pays for Moon’s prepaid cards.
Payments In A Flash: Strip Club In Las Vegas Now Accepts Lightning
Guests at the Crazy Horse 3 will soon be able to tip their favorite dancers using BTC.
The Crazy Horse 3 gentlemen’s club has announced it has become the first major entertainment venue in Las Vegas to accept Bitcoin using the Lightning Network.
The nightspot will implement the layer two Bitcoin scaling solution enabling punters to make payments in a flash. It has integrated BTC payment processor OpenNode which will initially allow guests to securely purchase VIP bottle packages using BTC through the venue’s website.
According to the announcement, the Bitcoin payments rollout includes plans to accept the digital asset for admission, food selections, craft cocktails and the club’s signature “dance dollars” which are used for tipping entertainers. In other words, Lightning for lap dances.
Crazy Horse 3 publicist, Lindsay Feldman, said that the club is embracing the opportunity to accept Bitcoin as a way to deliver convenience and an additional level of anonymity for its guests, adding:
“The club’s partnership with OpenNode allows us to cater to our tech-savvy customers’ needs by offering an innovative form of payment that’s both seamless and secure.”
OpenNode is a Lightning Network-powered BTC payments platform that operates in 126 countries and has more than 8,000 users. The platform will allow the venue to receive BTC payments directly without the involvement of third-party payment processors or associated fees.
The adult industry has embraced cryptocurrencies over the years as much through necessity as choice, with payment processors either banning such businesses or charging them exorbitant fees for being “high risk”.
Bitcoin’s leading layer two scaling solution has seen steady growth over the past year. Since the beginning of 2021, LN nodes have increased by 56% to a record high of 12,844 at the time of writing according to BitcoinVisuals.
The number of unique channels connecting nodes for the first time has also seen impressive growth this year with an increase of 54% since January 1.
Bitcoin and crypto acceptance in Sin City is also showing growth. In May, the Resorts World Las Vegas casino-resort announced a partnership with crypto exchange Gemini to allow patrons to make payments using BTC and cryptocurrencies using their exchange wallets.
Bitcoin Lightning Network Growth Passes New Milestones
However, only about 58% of nodes are operating channels and earning yield.
The Lightning Network – a layer 2 payment product built on top of the Bitcoin blockchain that enables secure, private and near-instantaneous transactions at little to no cost – has surpassed 25,000 active nodes for the first time, an indication that the network is growing stronger with more nodes and more channels.
During the past 30 days, the number of active nodes has risen 8% to 25,010. A node is essentially a “user” on the network who sets up their computer to interact with other nodes. That way, they can send, verify and receive information – in this case, bitcoins.
As a decentralized network, the Lightning Network has no central data server that stores all of the transactions or interactions between users. Instead, its decentralized network of distributed nodes keeps track of the data, or part of it.
In order to reduce congestion on the Bitcoin blockchain, the Lightning Network allows users to route their transactions through off-chain channels. All of the transactions that pass through a channel are rewritten into a single transaction and settled on the Bitcoin network, allowing for millions of transactions to be made in a matter of seconds. These channels run between the various nodes that have chosen to connect in this way.
Not every node, however, operates a channel. Currently, the number of nodes with channels is 14,419, or about 58% of all nodes. The remaining 42% are simply there, for the time being, at least.
But for those who do choose to open and fund a Lightning Network channel, there is the potential to earn yield.
Earning yield on the Lightning Network
In order to open a channel, node operators have to “fund” it with a small amount of BTC (+5.66%). Right now that average funding amount is about 0.035 BTC. Whatever amount is in that channel represents the maximum value of any transaction that can be routed through that channel. In return for providing that channel liquidity, node operators collect a small fee when a transaction routes through one of their channels.
In the Lightning Network, not every node is connected to every other node; that would require far too much storage per node. Usually a transaction has to “hop” through channels, from one node to the next in order to find a path to its final destination. To accomplish that, the Lightning Network uses onion routing from the Tor Network, a privacy-based network protected by encryption, which essentially allows a transaction to hop from node to node until it reaches a target.
Each hop through a channel requires its own fee – so the fewer hops, the better. Currently, the average hop distance is 8.8 hops.
Since we last reported on July 15, the number of channels has increased to 65,739 and expanded their capacity by roughly 78%, from 1,800 to over 2,300 BTC, according to data from 1ml.
The increase in the number of channels means that there are more connections between the nodes. Since every single jump between nodes costs a fee, having more channels available increases the chances of finding a more efficient route for the transaction’s final destination. Thus, increased connectivity can greatly reduce the fees associated with sending transactions.
Greater connectivity and more channels also translates to more competition in facilitating transactions. Average fees have dropped below the base fee. Although the base fee for passing through a node’s channels is 1 sat, the median fee that is being charged is only 0.000006 SAT/SAT spent or $0.000000003018/SAT spent. (A “sat” is a satoshi, the smallest unit of a bitcoin.)
Furthermore, the network capacity signifies a more developed network because it means that cumulatively, users have “invested” in the network. In order for transactions to hop from node to node, each channel must be funded adequately. The higher the capacity, the more funds can be sent.
The growth is, in part, due to the increasing need for a solution to Bitcoin’s scalability problem, which states that Bitcoin is limited to only seven transactions per second on the base layer. Layered networks like Lightning and sidechains like Liquid have gotten the attention of big names in crypto like Twitter and Square CEO Jack Dorsey, whose Twitter user name now includes a Lightning bolt for the Lightning network.
Earlier this summer, the Lightning Network made headlines when Jack Mallers, CEO of payments company Strike, announced the adoption of bitcoin as legal tender in El Salvador. In partnership with the president of El Salvador, Nayib Bukele, Mallers’ Lightning-based payment app Strike was implemented throughout the country.
Now, Mallers is taking an aggressive stance against big centralized exchanges like Coinbase by bringing on app bitcoin purchase fees to near zero. All of these big moves signify his dedication to fostering the growth of Bitcoin as well as bringing attention to Strike and Lightning.
Bitcoin Lightning Nodes And Channels Hit Record Highs
The number of Lightning Network nodes has increased 160% over the past 12 months, while the number of channels is up 170% since January.
The node count for Bitcoin’s leading layer-two solution, the Lightning Network (LN), has spiked to record levels following a surge of adoption.
According to on-chain analytics provider Glassnode’s Monday “Week On-chain” report, the number of Lightning Network nodes increased by 160% during September to tag a record high of 15,600. At the end of August, just 6,000 LN nodes were live.
The number of channels, or connections between different nodes, on the LN has also hit a peak of 73,000, representing an average of 4.6 channels per node, the report added. Bitcoin Visuals is currently reporting an average of 9.3 channels per node as of Sunday.
“This is around double the number of channels that were live through the period from 2019–20, with most of this growth occurring since May 2021.”
The total capacity of the Lightning Network has seen “explosive growth” this year according to Glassnode. The metric refers to the total amount of Bitcoin (BTC) that can be transferred using the LN.
The network’s capacity is currently at an all-time high of 2,904 BTC ($123 million at current prices). The milestone marks an increase in capacity of 170% since January, with roughly 22% or 514 BTC having been added to the network in September alone.
The average channel capacity or amount of BTC sent per channel is currently 0.04 BTC (around $1,670), representing another all-time high for the network. This is an increase of 43% from the mean channel size of 0.028 BTC throughout 2019 and 2020.
The Lightning Network has recently been in the headlines as a result of the popular social media network Twitter integrating LN for tipping in addition to the network’s national roll-out across El Salvador amid the country’s digital asset embrace.
The Lightning Network was proposed by two researchers, Thaddeus Dryja and Joseph Poon, in 2015 as a way to take Bitcoin transactions off-chain to increase throughput and decrease costs.
Liquid Network Block Production Resumes Following Transaction Processing Issues
Pending Liquid transactions had been queued in the mempool for roughly 22 hours after the network reported an issue which caused “block signer nodes failing to validate certain parameters against each other.”
Block production on Blockstream’s Liquid network has resumed after technical problems related to a functionary upgrade caused many transactions to queue for hours.
In a Monday update from a Liquid oversight board member identified only as Wiz, Liquid’s failsafe mode was activated yesterday as “an unexpected issue occurred causing block signer nodes failing to validate certain parameters against each other.” As a result, the network stopped producing blocks and transactions steadily queued in the Liquid mempool for roughly 22 hours, starting at approximately 5:19 pm Eastern Time on Monday.
Wiz reported Liquid developers have upgraded 10 of the 15 functionaries, with block production expected to resume once one more has been fixed. Pending Liquid transactions had been queued in the mempool until the nodes were upgraded, which was completed on Tuesday as the network reported blocks were coming in.
First announced in 2015, Liquid was designed to be a Bitcoin (BTC) sidechain aimed at speeding up BTC transactions settlements for crypto exchanges. The network supports its LiquidBTC (LBTC) tokens pegged to Bitcoin — there are 3,293 currently in circulation. In addition, the Liquid Federation has 57 members, including crypto exchanges Bitfinex, BitMEX, and Huobi.
Arcane Research Predicts 700 Million Lightning Network Users By 2030
Arcane Research says that Lightning Network usage has been on a steep upward trajectory since late last year, but in September, growth went parabolic off the back of El Salvador’s Bitcoin adoption.
The research unit of Arcane Crypto predicts the Lightning Network will go parabolic as adoption of the Bitcoin (BTC) layer-two payment protocol ramps up over the decade.
Arcane Research published the “State of Lightning” report on Tuesday and analyzed the Lightning Network in terms of current capacity, wallet payment volume, the growing rate of adoption, and the switch from online services to everyday usage.
The report provides ambitious estimates for the future of the Lighting Network, such as 90% of Salvadorans over the age of 15 having access to Lightning payments by 2026, and 50 million Lightning users, representing $17 billion in annualized payments, for things like remittances and household expenditure by 2030.
Arcane sees gaming and streaming video and audio as a major use case for Lightning, with streaming companies such as Spotify or Netflix able to utilize the network for micro-transactions to offer pay-per-minute, or per-second, streaming services, representing an “enormous” chance to onboard new Lightning users.
It forecasts 700 million users in these categories by 2030. Using an estimate of one hour per day on these services, and 25% of the time spent on those with Lightning payments, Arcane assumes there will be one micro-transaction per second:
“Our estimate then equals no less than 364 trillion Lightning transactions per year,” the report says.
The research was conducted in collaboration with Bitcoin payments company OpenNode and highlights how the usage of the Lightning Network has sharply increased since late last year. El Salvador’s adoption of Bitcoin on Sept. 7 propelled the network ever further:
“In September 2021 growth went parabolic. This was driven mainly by the introduction of Bitcoin as legal tender in El Salvador.”
The report also highlights the significance of peer-to-peer crypto exchange Paxful enabling Lighting payments to its user base of 7 million last month, as well as Twitter’s integration with the network by launching a BTC tipping service for its 186 million users.
Since Lighting went live on Bitcoin nearly three years ago, the network has grown to hold a capacity of almost 3,000 BTC, with 17,000 nodes operating on the network and 73,700 unique channels.
“As of writing, the public Bitcoin capacity on Lightning equals more than $120 million, with users across the world finding value in the option to conduct near-instant small payments at very negligible fees,” the report reads.
But while publicly available metrics such as total channel capacity show rapid growth in adoption, wallet payment volumes have far outperformed that metric since August.
“We have focused on mainstream usage through wallet providers, as we believe this is the best measuring stick of adoption. Therefore, the estimated numbers do not contain the activity from developers, channel rebalancing, most b2b transactions, etc.,” the report reads.
According to Arcane, wallet payment volume has increased by 20% month-over-month since August, which far exceeds the monthly growth rate of 10% from the metric of channel capacity.
“In September, the discrepancy widened further, with payment volume almost doubling compared to a 26% increase in public channel capacity,” the report reads.
El Salvador And Other Countries
Arcane estimates that close to 90% of the population from El Salvador 15 years or older will have gained access to Lightning payments by 2026.
The estimate relies on a range of central assumptions such as a 15% yearly growth rate of internet adoption previously seen in 2018 and 2019, along with President Nayib Bukele’s figure of 2.1 million Chivo wallet users from September being correct.
The report predicts that if other countries with “poor banking access” can follow the suit of El Salvador, there could be 50 million Lightning users who would represent $17 billion in annualized payment volume on the network by 2030.
Argentinian Entrepreneur Tries To Take His Tipping App Global With Lightning Network
With 300,000 local users, Cafecito was preparing to expand regionally. But the possibilities opened up by bitcoin have made its young founder more ambitious.
Damian Catanzaro, a 26-year-old Argentinian programmer, created a sensation among Argentinian content creators and nongovernmental organizations (NGOs) with Cafecito, a tipping platform he started in February 2020 that’s reached 300,000 users.
But now he wants to go global after recently integrating the Lightning Network, a layer 2 payment product built on top of the Bitcoin blockchain.
Catanzaro developed Cafecito – the name is a Spanish word that refers to a small cup of coffee – when he was looking for ways to monetize the educational programming content he was publishing in his social networks, especially Twitter.
“I found that there were a lot of crowdfunding platforms from abroad, like Patreon. There was one in particular that focused on buying cafecitos named Buy Me a Coffee. The model was good, but there was nothing for Argentina,” Catanzaro recalled, given that the Y Combinator-backed Buy Me a Coffee was based in San Francisco.
Due to its lack of U.S. dollar reserves, Argentina makes it difficult to use platforms that must be funded with foreign currencies.
Within a week, Catanzaro developed an initial version of Cafecito, which only contained his profile and was linked to MercadoPago, the payments processor of e-commerce giant MercadoLibre, allowing people to send Argentinian pesos to the programmer. Its business model consists of charging 5% of the tip given to the creator, while the payment processor, MercadoPago, keeps another percentage of the total received, Catanzaro said.
“After launching the product, a lot of people started talking to me telling me they wanted to have a profile on Cafecito, and that’s when I became interested in the idea to see how it would turn out,” said Catanzaro, who left his other jobs as a programmer to dedicate himself full-time to the fast-growing project.
On May 29, 2020, Catanzaro launched the first version of Cafecito for the public. “From that day on, the platform started to grow a lot, every day,” he said. Since January of this year, it has recorded monthly growth of 30% and currently has 300,000 users.
However, a new world opened up for Catanzaro last week when he integrated the Lightning Network into the platform by enabling a worldwide market for his platform.
Cataranzo first came up with the idea in 2020, but didn’t implement it until this month. The first time he came to Lightning Network, he discovered “a huge, gigantic world already developed with payments.”
Catanzaro decided to use the Open Node platform to integrate the Lightning Network, which he did himself. “I already made the first demo and next week I will open a beta for 1,000 users,” he said.
“The whole crypto ecosystem, most of all the bitcoin ecosystem, thanked me, and a lot of non-crypto entrepreneurs also told me that the development was really cool. It’s something that didn’t exist. The response was super positive,” he said.
According to Catanzaro, none of his potential tipping competitors from abroad have integrated crypto payment options. And while Twitter recently introduced a feature where users can easily tip each other in bitcoin via the Strike payment network, Strike is only available right now to people in the U.S. and El Salvador.
“It’s a long way to go before it’s a worldwide thing,” Catanzaro said of tipping in crypto on Twitter.
Nevertheless, when Catanzaro first heard of Twitter’s tipping feature, he thought Cafecito could be brought on board with that initiative. “In fact, I sent an email to several people at Twitter to see if they would be interested in collaborating and integrating Cafecito as another option. I have not received any response yet,” he said.
So far, the programmer has not spent a dollar of advertising on Cafecito. “It was like a snowball. When someone joins, they share it on social networks and it is seen by someone who is interested in the project. And they end up coming to the platform organically,” he said.
Catanzaro plans to expand Cafecito’s model throughout Latin America during 2022 so that people in the region can use the platform to tip creators with local means of payment rather than U.S. dollars.
“There is a lot of paperwork and bureaucracy to open companies elsewhere, but next year everything will be ready for expansion,” said Catanzaro, who identified Mexico as the first country outside Argentina where Cafecito will launch.
Before he integrated Cafecito with the Lightning Network, Catanzaro was planning for Cafecito to be a regional player. “But bitcoin is going to be global,” he said, adding that now he intends to translate the platform into English, although the name, Cafecito, will remain the same.
In the future, Catanzaro plans to make Cafecito a social network, where people can not only leave a tip but also follow users and comment or like posts on walls.
Given the platform’s growth, many venture capitalists have approached Catanzaro, but he has declined offers, arguing that the platform generates enough funds to keep growing via bootstrapping.
“I don’t need a big capital injection. I could take it, but I’m not interested,” he said. “I like to follow this path. I think it’s the right one.”
Bitcoin Suisse To Enable Lightning Network Payments
Bitcoin Suisse, Switzerland’s biggest BTC broker, has now made Lightning Network technology available for its crypto payment system.
Bitcoin Suisse will use the Lightning Network to make Bitcoin (BTC) transactions both cheaper and faster. It will be the first cryptocurrency payment processor in Switzerland to integrate the technology, according to a press release dated Nov. 10
Armin Schmid, head of Bitcoin Suisse Pay, praised the decision, noting that Lightning transactions will play a significant role in scaling crypto apps and driving mass adoption.
“Lightning transactions enable higher throughput per second at the price of a fraction of a cent — making them a game-changing innovation for crypto applications.”
With the launch of this cutting-edge second-layer Bitcoin technology, consumers and merchants using Bitcoin Suisse and Worldline will be able to conduct faster transactions with lower blockchain costs. The announcement further says that the decision is a significant step forward in Bitcoin Suisse’s efforts to “promote the broader adoption of crypto technology.”
The Lightning Network is a decentralized network built on Bitcoin’s second layer that employs smart contract technology to construct a secure network and allow small value transactions at faster speeds and lower costs. In 2015, Joseph Poon and Thaddeus Dryja proposed the Lightning Network protocol in an effort to address Bitcoin’s scalability issue.
Worldline, the European counterpart of Bitcoin Suisse, will be able to process transactions made using the Lightning Network. As such, customers and merchants will benefit from the ease of crypto transactions as a result of the Lightning Network integration.
The Lightning Network has attracted attention in recent weeks as a result of Twitter’s use of it for tipping, along with the network’s nationwide rollout across El Salvador.
As reported by Cointelegraph, the total capacity of the Lightning Network has seen “explosive growth” in 2021. In September, the network’s capacity reached an all-time high of 2,904 BTC, a rise in capacity of 170% since January. The network capacity will likely increase even more now that the biggest cryptocurrency broker in Switzerland has incorporated it.
Tether Launches Synonym To Boost Bitcoin Adoption Through Lightning Network
The new venture is pursuing hyperbitcoinization by combining the Lightning Network’s speed with the architecture of an open peer-to-peer platform.
Synonym Software Ltd., a company founded by stablecoin issuer Tether Holdings Limited, officially launched on Tuesday, setting in motion a highly ambitious project to bring Bitcoin (BTC) transactions mainstream through an independent financial platform that utilizes the Lightning Network.
Synonym’s stated goal is to enable self-ownership and control of crypto assets by creating an open financial ecosystem that utilizes Bitcoin and the Lightning Network, the company announced Tuesday. CEO John Carvalho said “Hyperbitcoinization won’t magically happen on its own.
In order to live in a world without big banks, oppressive regulations, or Big Tech presiding over our lives, we need a strategy and ecosystem to replace the legacy economy. That is where Synonym comes in.”
The first protocol to be launched by Synonym is called Slashtags, an interoperability framework for private networks that doesn’t rely on blockchain technology and can be used by any platform for coordination, privacy and consensus.
The Bitcoin network recently completed its highly anticipated Taproot upgrade, which targets improved transaction efficiency, privacy and smart-contract functionality. Taproot marks the first major upgrade to the Bitcoin network since Segregated Witness, also known as SegWit, all the way back in 2018. SegWit eventually culminated in the launch of the Lightning Network, Bitcoin’s second-layer scaling solution.
Scalability has been cited as one of the biggest barriers preventing the mass adoption of Bitcoin as a transactional currency. The Lightning Network aims to solve the scalability issue by enabling off-chain transactions. The number of Lightning Network nodes, which open payment channels with each other, has increased by 128% over the past 12 months, according to industry sources.
At the time of writing, Bitcoin commands over 43% of the total cryptocurrency market capitalization. The premier digital currency recently topped new all-time highs north of $69,000 amid growing mainstream adoption and recognition from financial elites that crypto is a new asset class.
Jack Dorsey’s Spiral demos Bitcoin Lightning Development Kit
A puppet of Jack Dorsey has been used to explain the Lightning Network in a new video promoting Spiral’s LDK.
The crypto arm of the recently rebranded Square (now Block) has demonstrated its Lightning Development Kit (LDK) as it aims to turbocharge the Bitcoin network.
The team from Jack Dorsey’s Spiral published a video on Tuesday showcasing the capabilities of Bitcoin (BTC) Lightning and the LDK.
LDK has been designed to allow developers to seamlessly plug their applications into the network on mobile devices and point-of-sale terminals.
LDK supports native APIs using Rust, C, Swift, Java and Kotlin coding languages. This lets developers customize their wallet app for their users in the language of their choice while also removing the necessity for separate Bitcoin and Lightning Network (LN) wallets.
In the video, Twitter’s former CEO described the LDK as a program that “makes it easy for any developer in the world to build a wallet.”
We made a very short documentary about the Lightning Development Kit, our big project these last couple of years. We wanted a puppet to perform @jack’s parts but settled for actual @jack: https://t.co/q6eW4PDuNW
The video features a puppet Jack Dorsey interacting with store clerks and owners by paying for services with Lightning Network. He uses his mobile LN wallet app to pay for a nose piercing and a movie ticket, while the video periodically cuts to the Spiral team talking about the merits of Bitcoin and the LN.
Spiral, previously known as Square Crypto, has been developing Bitcoin wallet solutions since it was founded in 2019. In addition to the LDK, Spiral is working on the Bitcoin Development Kit, which allows cross-platform mobile wallet interactions.
Lightning is a layer-two scaling solution for Bitcoin, which, Spiral project manager Haley Berkoe, said, “Turns Bitcoin into an actual payment system.”
Conor Okus from Spiral expects its LDK to increase the adoption of Bitcoin and the LN by “providing a way for people in different parts of the world… to store value and engage in economic activity.”
The product release comes at a fortuitous time for Lightning users as network nodes are at all-time highs. The last reading from Bitcoin Visuals shows that there are 18,905 nodes with active channels on the Lightning Network.
Over the last three months, the total number of nodes has grown by 23%, with 3,534 new nodes added. The LN currently has a network capacity of 3,285 BTC, or around $166 million according to 1ML.
Strike To Integrate Bitcoin Lightning With Shopify: Why It Matters
At the Bitcoin 2022 conference in Miami, the Bitcoin Lightning Network seems to be getting closer to mass adoption as large companies start to partner with Strike.
The digital payments platform built on the BTC network announced that it will integrate with Shopify and partner with payment firm Blackhawk and NCR, the world’s largest point-of-sale (POS) supplier.
“We’re proud to partner with Shopify to provide merchants with a cheaper and faster way to accept U.S. dollars using Bitcoin technology,” said the founder and CEO of Strike, Jack Mallers, and added, “The Lightning Network is a global payments network that lowers costs, enhances speed, drives innovation, improves financial inclusion, and brings the power of choice to consumers and merchants.”
Creating an alternative to the traditional payment system, this integration translates into a quick and cheap service that brings many benefits to the consumer chain. It will be available worldwide for anyone with a Lightning Network wallet.
Shopify already supported crypto payments and had added merchant support for NFTs. Coinbase Commerce, BitPay, and CoinPayments.net allow Shopify merchants to accept multiple cryptocurrencies on their stores. Integrating the Bitcoin Lightning Network, however, opens many new doors.
On the other hand, NCR offers a large list of payment solutions, which means that consumers could use the lighting network to pay for groceries, restaurants, retail, and more.
Strike has officially partnered with Shopify, Blackhawk, and NCR to deliver Lightning powered payments to online and storefront vendors everywhere.
Folks will be able to pay for groceries or retail shopping with immediate settlement over Lightning.
“With Bitcoin as the monetary network, the financial system will be cheaper, faster, more innovative, and more inclusive,” Mallers had said before.
Large integrations and partnerships like these make the BTC payments network more accessible. The Strike app has greatly benefited El Salvador’s bitcoin initiative, and bitcoin has also felt the positive consequences of being adopted as a legal tender by a country.
However, the world of commerce is, of course, much larger than El Salvador, and implies greater levels of adoption.
“Launching an integration on the Shopify platform is part of Strike’s plans for wider expansion of bitcoin acceptance for commerce both online and in-store.”
Similarly, a couple of tweets by Mallers started a rumor about Apple Pay possibly integrating the Lightning network as well.
Although this has not been confirmed, it would be a major addition to the big news because. iPhone users could turn into a huge push toward the Bitcoin revolution.
Moreover, both consumers and merchants will soon start to see the great benefits of integrating the network and why it is the transformative future of the whole payments system.
Although in the U.S. every BTC transaction is taxed, there’s something to keep in mind: using the BTC network does not imply the purchase needs to be done in BTC, which means that the consumer can pay in USD using Strike, and this would make it a non-taxable event.
This way, USD gets transformed to BTC then back to USD, with no holding time (meaning no gain/loss tax), same low fees, and fast transaction.
But why will consumers want to start using the network and lose credit card points? It might turn into a cycle of events.
Merchants can lose around 20% of revenue with chargebacks, which goes to 0% using the BTC network, besides eliminating transaction fees.
Eliminating the chargeback headache is an extremely convenient opportunity for merchants, so many will probably start offering incentives to consumers. This could be greater than credit card points and still mean larger revenue for venues and sellers.
Beyond easing the pains of fiat-to-fiat payments, the meaning of holding BTC is heading toward a plurality of use cases.
Being able to use the digital coin as form of payment for so many services all around the world means that the asset could not only be owned as a safe haven to protect savings from inflation and so forth, but it also makes it an useful tool for daily needs.
Lyn Alden explained that this integration “increases the network’s practical permissionless payment capability,” adding that “the more places that accepted BTC at point of sale (on-chain or Lightning or otherwise), the more permissionless the whole network is.”
“This is because, if all you can do with BTC is convert it back into fiat on a major exchange, then it’s easy to isolate it, effectively blacklist addresses, etc. But if you can directly spend it on goods and services across companies and jurisdictions, it’s harder to isolate.”
Cash App And Chivo Help Drive Lightning Payment Volume Up 400%
Bitcoin’s layer-2 scaling solution, the Lightning Network, has seen payment volume increase by over 400% as real adoption grows.
A new report highlights how the Lightning Network has grown in popularity as a way of transferring digital assets quickly and efficiently around the globe.
On Thursday, CNBC told the story of Alena Vorobiova, a Ukrainian refugee currently seeking sanctuary in Poland.
Vorobiova used Lightning to transfer $100 worth of Bitcoin (BTC) from Miami, where it was then withdrawn from an ATM in the equivalent Polish currency — all within the space of three minutes.
That’s the sort of low-cost high-speed transaction that has seen the layer-2 scaling solution for Bitcoin grow 410% in payment volume over the past year.
According to a report by Arcane Research, the number of payments that occurred on the Lightning Network in the past year doubled while the total value of those payments quadrupled.
The report warned that the widely-cited public metrics used to measure Lightning Network adoption — most commonly total value locked (TVL) — underestimate the size of the network as they fail to count private channels and invisible nodes.
Additionally, the metrics don’t reflect real-world Lightning Network usage, whereas looking explicitly at payment volume paints a clearer picture of real Lightning adoption.
A partial explanation for the surge in payment is owed to the enormous increase in the number of users who have recently gained access to the Lightning Network. This is through applications like El Salvador’s Chivo Wallet and United States-based payment application CashApp.
Arcane estimated that in August 2021, roughly 100,000 users had access to Lightning payments. By March of this year, over 80 million people had the ability to access payments on the Lightning Network , which shows that there is a large potential user base.
The report found that roughly 50% of the value of all payments came from direct transactions between individuals, or peer-to-peer (P2P) transactions.
Almost one-third of the payment value came from exchange withdrawals and deposits, with the remaining 20% coming from purchases made through some form of vendor.
Despite Bitcoin being originally designed as an electronic cash system, the sluggishness of the Bitcoin networks in resolving transactions gave rise to layer-2 solutions. The Lightning Network was launched in March 2018 to provide faster and cheaper BTC transactions.
Binance And Coinbase Silent On Bitcoin Lightning: Community Tries To Understand Why
The Lightning Network implementation may be against business plans of some crypto exchanges, or simply not a priority for others, several community members suggested.
The Bitcoin Lightning Network integration started to take off among the cryptocurrency exchanges worldwide. However, some of the world’s largest crypto trading platforms seemingly are not in the hurry to integrate the protocol.
Last week, Robinhood crypto trading app became the latest major industry player to announce the Lightning integration, following in the footsteps of BitPay and the Kraken crypto exchange.
As the main goal of the Lightning integration is to reduce the cost of Bitcoin (BTC) transactions and accelerate the network transfers, one may wonder what cryptocurrency exchanges have still not added the Lightning support.
Binance, Coinbase And FTX Stay Silent On Lightning
Not everyone is happy with the pace of Bitcoin LN adoption. David Coen, a software quality assurance tester and crypto enthusiast, is disappointed at the lack of progress for the Lightning Network integration among major crypto exchanges.
He compiled data from official sources, social media presences and Lightning explorers like 1ML and Amboss, only to find out that Binance, Coinbase and the major South Korean crypto exchange Bithumb are not in the list of “Lightning exchanges.”
Despite providing comprehensive information about the Lightning Network on their websites, both Coinbase and Binance declined to comment on their potential Lightning Network integration plans to Cointelegraph.
FTX — which is not mentioned in Coen’s list — has refused to comment as well. In January last year, FTX said that it “probably pays more in transaction fees than any other single entity in the world” on its official Twitter account.
There are apparently a wide number of possible reasons why some of the world’s largest crypto exchanges have not added the Lightning support so far.
One Redditor suggested that the Lightning Network availability would be essentially associated with fewer incentives to keep Bitcoin on exchanges like Binance due to expensive withdrawals. “It may not be to Binance advantage to implement it though. I personally want to use the Lightning Network to transfer all my BTC trading to cold storage,” he said.
According to Coen, the Lightning implementation could be simply not a priority for some major crypto exchanges, or even against their business plans for others.
“I believe Binance has no interest in integrating Lightning Network deposit or withdrawal because it could be against their business plans,” Coen said.
He suggested that Binance may be more interested in promoting usage of its proprietary blockchain networks, including the Binance Beacon Chain and the Binance Smart Chain, particularly for withdrawals.
Some Major Crypto Exchanges Prioritize Industry Trends Like NFTs Over The Lightning Network
Coen emphasized that Lightning not only allows to move Bitcoin at a lower cost but also enables users to hold actual BTC, stating:
“With Lightning Network, users are able to move funds even for free, if they have a direct channel to the exchange and most importantly, they have real bitcoin instead of a Bitcoin token on an Ethereum Virtual Machine network.”
The Lightning enthusiast also doesn’t expect other exchanges like Coinbase to integrate Lightning support in the near future “since the priority seems to be to integrate as many altcoins as possible and follow the trends of the market,” he said.
Coen added that nonfungible token (NFT) support appears to be more a priority for Coinbase over Lightning, citing the company’s NFT initiative released officially last year.
The expert’s remarks echoed some similar comments in the community.
Lightning Is Becoming Less Cutting Edge And More Of A Necessity
According to some community members, Lightning is still a cutting-edge development today, which makes large crypto exchanges take significant time and effort to make such improvements.
However, with exchanges like Bitfinex, OKX (formerly OKEx) and Kraken adding Lightning, “it’s becoming less cutting edge and more of a necessity to be competitive,” a spokesperson for the Amboss explorer told Cointelegraph.
“The user experience with Lightning is superior and exchange users will be looking for the easiest way to make deposits and withdrawals from their exchange of choice. […] Lightning support is a necessity for users who need to execute fast trades,” the representative stated.
Launched in March 2018, the Lightning Network is a Bitcoin layer-two protocol designed to enable faster and cheaper BTC transactions.
Bitfinex is believed to be the first crypto exchange in the world to add Bitcoin Lightning support for payments by integrating the protocol in December 2019.
The Lightning Network Is Bringing Payments Back To Bitcoin
The Lightning Network, which enables small and instant bitcoin payments, is getting bigger and more useful. Here’s a state of play. This piece is part of CoinDesk’s Payments Week.
In the fall of 2008, the white paper “Bitcoin: A Peer-to-Peer Electronic Cash System,” authored by Satoshi Nakamoto, circulated on a cryptography mailing list. As signaled by the title, it proposed a protocol for creating an electronic cash system without the need for intermediaries or trust.
Some months later, in January 2009, the first-ever Bitcoin block was mined.
There was no block size limit on the Bitcoin network in the very beginning. To prevent network spamming and the blockchain size increasing exponentially, a block size limit of 1MB was introduced.
The Bitcoin Network has maintained its small block size and long blocktime to keep the network decentralized through tumultuous times with considerable disagreements.
The limited throughput capacity of the Bitcoin blockchain makes small payments expensive
The Bitcoin Network’s decentralized and secure design, with a small block-size and relatively long blocktime, does not come without drawbacks. The transaction capacity of the Bitcoin blockchain is far too low for using bitcoin payments on a large scale.
The Bitcoin blockchain’s practical throughput is seven transactions a second on average. In comparison, the Visa payment network processed 5,200 transactions on average per second in 2021.
Also, payment confirmation on the Bitcoin Network takes time. A new block is mined, on average, every 10 minutes, and it’s standard to require a transaction to be included in several mined blocks for a transaction to be considered confirmed.
The limited space on the blockchain means that transactions compete to be included in a block. Miners will want to maximize their income and pick the transactions that give them the highest fees.
With the current demand for transactions, transaction fees become disproportionally high for smaller payments.
The Lightning Network enables small and instant bitcoin payments in large numbers
The Lightning Network solves the limited throughput capacity of bitcoin payments on the Bitcoin blockchain and dramatically decreases the transaction fees on smaller payments.
Utilizing the Lightning Network, millions of people can send fractions of a bitcoin at instant speed – at the same time.
The Lightning Network is a network of payment channels; each channel is opened with one transaction on the Bitcoin blockchain. Once a channel is opened, the two counterparties in a channel can sign updated bitcoin transactions redistributing the value of the opening blockchain transaction.
The beauty of the Lightning Network is that these updated bitcoin transactions don’t have to be broadcasted to the blockchain and hence do not take blockspace or require miner fees.
But the updated transactions still have value because they could be broadcasted to the Bitcoin blockchain as a valid Bitcoin transaction.
The network component enters through how payments are relayed between people not having a direct connection through a payment channel. As long as you are connected to a person who is connected to the recipient (you can add more jumps here), your payment can be performed off-chain through all channels along the route, signing updated and valid Bitcoin transactions.
Use Of The Lightning Network Is Increasing Fast
The use of the Lightning Network is somewhat of a blackbox due to the protocol design. Therefore, most are left to look at imperfect public metrics to gauge the growth in Lightning Network usage.
In our newly published report, The State of Lightning Volume 2, we estimate how much the Lightning Network is used for payments.
The number of payments on the Lightning Network has roughly doubled, compared to a year ago, while the value of the payments has increased by more than 400%, measured in U.S. dollars.
Stripping away trading-related payments, which vary significantly in volume with market sentiment, we see that the increase in commerce payments and personal transfers has been even higher. And significantly, they are on a continuous upwards slope.
Several other factors point to great potential for further increased adoption of the Lightning Network. We estimated that just over 100,000 users had access to Lightning payments globally last summer.
In March 2022, we estimate more than 80 million people had access to Lightning payments on an installed application.
Users with access to Lightning payments are not the same as active users. It’s, for instance, reasonable to believe, and the numbers back it up, that most of the users of popular payment apps that recently implemented Lightning payments still don’t use Lightning.
However, more user access increases the likelihood of more widespread use. And the possibilities of using bitcoin payments over Lightning are growing, as highlighted by a flurry of Lightning integration announcements at Bitcoin 2022.
The Numbers Indicate That A Meager Percentage Of Bitcoin Holders Use It For Payments
BitPay, likely one of the most used payment processors for non-trading-related bitcoin payments, reported it processed close to 40,000 bitcoin transactions in February. Our data shows more than 700,000 non-trading-related payments on the Lightning Network in the same month.
Therefore, in terms of numbers of transactions, it’s not too far-fetched to think that the Lightning Network is close to rivaling or surpassing the Bitcoin Network in non-trading related payments.
Despite rising quickly, comparing these transaction numbers to the number of bitcoin holders, most bitcoin holders still use it solely as an investment vehicle. Crypto.com estimates that there are close to 180 million bitcoin owners globally.
Comparing this number with the number of non-trading-related bitcoin payments indicates that a minuscule share of bitcoin holders use bitcoin as a medium of exchange.
The Lightning Network Is Essential To Fulfilling Satoshi Nakamoto’s Original Vision
The Bitcoin white paper presents a solution for creating a payment network not reliant on trust or an intermediary. Nowhere in the white paper is it stated that Bitcoin is designed to be an investment vehicle with enormous returns that eventually will outcompete all other money and swallow the value of other investment vehicles.
The numbers, however, clearly indicate that a version of the latter is the motivation for most bitcoin “users.”
The current investment-driven demand for Bitcoin transactions is high enough to make fees unreasonably high also for many commerce payments that wouldn’t need instant confirmation.
Therefore, the Lightning Network is not only about allowing a greater number of transactions and transaction speed but also making bitcoin payments cheap enough to be used.
To keep small blocks and a long blocktime, a solution like the Lightning Network is essential if Bitcoin is to be a payment option in line with Satoshi Nakamoto’s original vision.
Lightning Payments Come To Mobile Games, Fueling Bitcoin Adoption
THNDR CEO Des Dickerson sees gaming as fertile ground for layer 2 payments and a big avenue for bringing new Bitcoiners into the fold. This piece is part of CoinDesk’s Payments Week.
When you hear “payments in mobile gaming,” maybe you think about “in-game pay-to-play-better” mechanisms where you can get a more powerful character if you just pony up $4.99.
Or, about how you can only move to a certain part of the map for a small payment of $1.99.
Or about how you can only open a certain door with a certain key, which you could get through a five-hour grind in the druid gardens.
Maybe you think about the $14.99 monthly subscription you’re paying for that chess app because you’re totally going to get good at chess soon.
As games opt for more of these small and microtransactions, Bitcoin’s Lightning Network (Lightning) can clearly play a role.
Its commerce layer can handle cheap, fast microtransactions as small as a single satoshi (1/100,000,000th of a bitcoin (BTC), ~$0.0004), allowing players to make easy in-game payments.
Making Money, Escaping Poverty: Bitcoin And Lightning In Mozambique
A class of 2021 Bitcoiner in Mozambique is using the Lightning Network to transact while using Bitcoin to protect his savings.
Bitcoin (BTC) is for all. For you, for Michael Saylor in Miami, and for 38-year-old Jorge, a Mozambican family man who’s using the largest cryptocurrency to make ends meet.
Jorge, who goes by his first name for anonymity, lives in the tiny village of Bomba, Mozambique, on its southeast coast. Since the COVID-19 pandemic stripped away tourism from the sleepy surf town, one of Jorge’s primary wage earners—tourism—disappeared.
Luckily, Bitcoin adoption is slowly swelling in Africa–from the Central African Republic across to Senegal and further north. Mozambique is also showing signs it’s warming to the world’s most popular crypto.
Mozambique is a vast, southern African country that struggles with poverty and corruption. At a GDP per capita of $448, it is among the world’s poorest countries. According to the World Bank, the pandemic pushed GDP per capita under the $500 mark in 2020.
Fortunately for Jorge, one of the surf camp owners Jorge used to work alongside is a passionate Bitcoiner who took him under his wing in 2021.
Herman Vivier, the founder of the South African Bitcoin-beach-inspired project Bitcoin Ekasi and crypto-friendly surf touring company Unravel Surf Travel, has been helping Jorge protect his savings and diversify his income using BTC.
Jorge wears many hats to earn a living, from surf assistant to arts and crafts seller to SIM card salesman. He told Cointelegraph that he now “accepts Bitcoin” for the services he provides.
Plus, he uses the Lightning Network to instantly swap between South African and Mozambican currencies via the Bitrefill Bitcoin application.
Jorge explains that while “very few people understand Bitcoin here,” he buys and sells phone credit on Bitefill (an app that sells gift cards payable with Bitcoin on-chain or Lightning), easily swapping between ZAR (South African Rand) and MZN (Mozambiquan Metical) currencies.
“It’s the easiest way of exchanging between ZAR and MZN. It’s instant and I’ve actually managed to gain more clients this way.”
While an impoverished nation, Statista reports that almost half the population in Mozambique has a phone subscription.
Furthermore, internet penetration in Mozambique is fast growing. More than 1.4 million people (+25%) came online between 2020 and 2021, as the internet now reaches over one-fifth of the population.
To bank with Bitcoin, all you only need is a phone and an internet connection. Given exceedingly high levels of corruption and currency weakness, Mozambique is an unlikely potential hotbed for BTC adoption.
Nonetheless, education remains the biggest obstacle. Jorge concedes that “In the beginning, learning about Bitcoin was pretty difficult!” Vivier helped him to install the necessary applications on his phone and set him up with a Lightning Network (LN)-enabled wallet; they chose MuunWallet, and he took the time to explain Satoshi Nakamoto’s innovation.
Here Is Hermann’s Tweet Thread, Explaining How Jorge Swaps Currencies With The LN:
Thanks to Bitcoin, Jorge now avoids high remittance fees for border payments; he’s able to flick instantly between currencies thanks to the Lightning Network and he has effectively opened up his customer base to the entire world.
Jorge wanted to express his gratitude to Vivier for the assistance, praising the response he’s received from the Bitcoin community so far.
“I’m learning a lot and Bitcoin is making my life easier: it helps to support my family and four children.”
Naturally, living near the world-renowned surf point break Tofinho, Jorge’s kids are surfers, and the eldest is a surfing instructor.
He concluded that, overall, thanks to Bitcoin “as coisas são bonitas,” which means thanks to Bitcoin, “Things are pretty.”
Libra Creator David Marcus Begins New Lightning Network Venture, Lightspark
Details are vague, but Lightspark has raised an undisclosed funding round co-led by Andreessen Horowitz and Paradigm.
David Marcus, the former crypto chief at Meta (formerly Facebook), took to Twitter to unveil Lightspark, a new company aimed at building on the Bitcoin-based Lightning Network.
* “I wanted to share that we are starting a new company called Lightspark to explore, build and extend the capabilities and utility of Bitcoin,” said Marcus in a tweet. “As a first step, we’re actively assembling a team to dive deeper into the Lightning Network.”
* The new project has raised an undisclosed funding round co-led by Andreessen Horowitz (a16z) and Paradigm with participation from Thrive Capital, Coatue, Felix Capital, Ribbit Capital, Matrix Partners and Zeev Ventures.
* Marcus previously founded Zong, a telecom billing network that was later acquired by PayPal (PYPL). He headed mobile payments at PayPal then became president. In 2014, Marcus moved to Meta (FB) to head Facebook Messenger, then payment products, where he created the much delayed (and ultimately closed) libra stablecoin project.
* “David’s latest project, Lightspark, aims at nothing less than reinventing the largest and most antiquated parts of financial services by building on the Lightning Network,” wrote Matrix Partners’ Dana Stalder – an early investor in Marcus’ Zong – in a blog post. “The team will share more information over time, but suffice to say, there is no one I trust more than David to start and lead such an ambitious company.”
* “Downturns are good moments to focus on building and creating value with mission-aligned people,” said Marcus. “We’re excited to dive into Lightning, learn more and work alongside the community. We’ll share more about our work as we make progress.”
Bitcoin Lightning Network Capacity Charges Through 4,000 BTC
The layer-2 technology built on Bitcoin now has 4,000 Bitcoin or $120 million locked up allowing for near-instant payments around the world.
There’s cause for celebration from the world’s largest cryptocurrency. The Lightning Network hit the 4,000 Bitcoin (BTC) public capacity milestone, meaning $120 million in value is ready for peer-to-peer payments.
The Lightning Network first broke the 1,000 BTC barrier in August 2020 and the 2,000 BTC barrier in July 2021. The capacity has doubled in the space of 18 months.
CoinCorner CEO Daniel Scott told Cointelegraph that “we had slow and steady growth with Lightning capacity to begin, but since Jan[uary] 2021, the uptick has been strong.”
Danny Brewster, CEO of United Kingdom-based Bitcoin exchange Fast Bitcoins told Cointelegraph that Lightning Network capacity “likely passed 4K a long time ago with private channel metrics not being publicly available.”
“With that being said, the constant growth has been a great start for the Lightning Network and I foresee it continuing into the future, as long as all stakeholders, from developers to entrepreneurs building businesses continue to push forward.”
A layer-2 payment protocol built on Bitcoin’s base layer, the Lightning Network allows for near-instant transaction finality.
In the following video, Paco de la India — a Bitcoin-powered world traveler — buys a pair of shorts from Mozambique-based Bitcoiner Jorge, using the Lightning Network:
Lead on-chain analyst for Glassnode, James Check, told Cointelegraph, “The expansion of Bitcoin’s Lightning Network appears to be transitioning out of the “reckless” phase, and into proper experimentation by early adopters.”
“As wallet designs and user experience improve, more kinks can be worked out, and the network will mature. The persistent growth of public Lightning capacity and channel count is a reflection of this vote of growing confidence and growing utilization,” he said.
Scott agreed, sharing that the positive trend is likely to continue “as more companies adopt Lightning and we see more use cases come to fruition.”
“The influence of El Salvador adopting Bitcoin seems to have been an inflection point for Lightning, giving it confidence and proving a real-world use case.”
According to data from 1ML, the average and median transaction cost for sending Satoshis (the smallest denomination of a Bitcoin) over the Lightning is well under $0.01, proving it packs a punch as payment technology.
Brewster concludes, it’s an “awesome start but a long way to go. It really is still early!”
Bitcoin And Lightning Network Can Save Defi From Adversity — MicroStrategy CEO
Bitcoin provides a “sound ethical, economic, and technical foundation for DeFi,” said Michael Saylor.
In light of the recent fragility in the decentralized finance (DeFi) sector, Bitcoin (BTC) maximalist and MicroStrategy CEO Michael Saylor feels that Bitcoin and the Lightning network can come to the rescue of the DeFi market.
With two enormous protocols, Terra and Celsius, facing acute difficulties within a month of each other, the DeFi sector is going through a tough time. And in a recent tweet, Saylor suggested that Bitcoin and Lightning could help stabilize the industry.
According to Saylor, Bitcoin provides a “sound ethical, economic, and technical foundation for DeFi.” He went on to say that the Lightning protocol and BTC token will be used to construct the next generation of DeFi.
Saylor was responding to a Bloomberg story on Tuesday, highlighting numerous key concerns in the DeFi field. Mahin Gupta, founder of digital-asset custody platform Liminal, told Bloomberg that:
“What is happening with Celsius will have serious repercussions for the industry. It’s a not-insignificant player, and its apparent failure will have ripple effects.”
Celsius Networks has closed down withdrawals and other transactions on its platform barely a month after the spectacular collapse of the Terra blockchain, which enticed investors with yearly returns of around 20%.
The collapse of Terra, which was triggered when its stablecoin lost its 1-to-1 peg to the United States dollar, and Celsius’ halt in withdrawals have added to cryptocurrencies’ losses.
As a result, the MicroStrategy CEO has been very enthusiastic about Lightning Network, Bitcoin’s layer 2-scaling solution. According to Saylor, Bitcoin is the future of money and the Lightning protocol will aid in transaction scalability. He added that:
“If you’re going to do payments and transactions high speed, you’re going to need a base layer that’s ethically sound, economically sound, and technically sound. That’s what Bitcoin is. But then billions and billions of transactions are going to go on a layer 2 like Lightning.”
To date, DeFi applications on the Bitcoin network haven’t attained the same level of popularity as they have on other blockchains like Ethereum and Solana.
Still, some people who have studied DeFi believe that it can be implemented in a sustainable manner on the Lightning Network, saying “stablecoins and fully collateralized loans against your BTC do have merit.”
As per Ignite’s Aliasgar Merchant, DeFi is “struggling,” and everyone is doing everything they can to make it through the crypto winter. He emphasized the recent events on Terra and Celius as proof that DeFi, which is intended to be the core of Web3, is failing.
The two most important aspects of developing a solid DeFi system, according to Merchant, are interoperability and scalability.
He added that “once the base is firm we can start focusing more on niche protocols to cater to our DeFi needs.”
Can You Earn Passive Income Running A Lightning Node?
1. What Is A Lightning Node?
A Lightning node is a piece of software that links to the main blockchain network and the Lightning Network, itself.
A node is software that connects to the blockchain network and exchanges the most up-to-date blockchain data. Its main goal is to keep track of every transaction on the blockchain network, making it immutable, transparent and decentralized. There are different nodes in each blockchain network; for instance, the Full node and Light node are the key Bitcoin (BTC) nodes.
On the contrary, specialized nodes known as miners solve mathematical puzzles and add transactions to a block of transactions to earn block rewards and transaction fees. However, full Bitcoin nodes verify transactions but do not collect block rewards. Still, there are other reasons why users should run a complete node, such as contributing to the general security of the Bitcoin network and boosting transaction security, which is critical if you plan to execute multiple Bitcoin transactions daily.
A Lightning node (LN) links to the main blockchain network such as Bitcoin, Litecoin (LTC) and the Lightning Network, itself. The Lightning Network’s nodes differ from those on the Bitcoin network in a number of ways, the most notable of which is the way they verify transactions. For example, the Bitcoin network requires nodes to validate every transaction on the blockchain, but the Lightning Network only requires nodes to verify transactions that connect directly with it.
But what are the benefits of running a Lightning node? To fully explore and appreciate the pros of LN technology, you must have at least one node up and running. Regardless of their network, anyone can run a node thanks to decentralization. So, how many lightning nodes are there? The number of public lightning nodes and merchants’ payments over the Lightning Network is increasing regularly.
2. How Does A Lightning Node Work Within The Lightning Network?
The Lightning Network is built by individual payment channels between parties united to route transactions. The LN is the outcome of the interconnections between multiple payment mechanisms.
The Lightning Network is a second-layer solution built on top of the Bitcoin blockchain to solve issues like long transaction confirmation times. An unstructured network surrounds it, and payments are made using channels, which are ad hoc peer-to-peer connections. In a channel, any number of payments can be sent. Nodes that are run by individuals or corporations route payments to keep the network running.
Any quantity of BTC must be locked up in a payments channel before using the Lightning Network. Then, until the channel is closed, it can be spent across the LN. An invoice, a long alphanumeric string of digits frequently represented by QR codes, is created by those who wish to receive a transaction. The person making the payment just scans the invoice with their Lightning Wallet and confirms the payment by providing a digital signature.
The payment confirmation is instantly sent to the original creator of the request and happens in a few seconds. Payments are not subject to long wait periods or excessive fees because they are not made on the Bitcoin blockchain. This means that micropayments of as little as one satoshi can be made using the LN. After using the network, one can exit by closing the channel to use their BTC on the main Bitcoin blockchain.
So, can you make money running a lightning node? The most obvious answer is “Yes,” but your profit might not necessarily be expressed in satoshis. You can earn BTC by forwarding transactions from other Lightning nodes through your node. Make sure your node is financed by sending BTC to your node wallet address and establishing channels with other nodes so you can begin earning BTC by participating in the Bitcoin Lightning Network.
3. How To Run A Bitcoin Lightning Node?
The prerequisites to run a Bitcoin Lightning node include an amount of Bitcoin to fund your Lightning channel, fiat money to buy the hardware equipment(s), and a Lightning-compatible wallet.
Remember that Lightning nodes are non-mining nodes, which means you aren’t mining Bitcoin but are vital to validating Bitcoin blocks. Validation Nodes are the most common name for these. MyNode and Umbrel are two of the most popular specialized hardware options for validation nodes. In just a few simple steps, you can set up a new myNode device.
To begin, download the myNode image for your device type and follow the instructions on the download page to flash it to an SD card. After that, turn on the device and connect an external SSD. You’ll be asked to type in your product key. You can select that option if you’re using the Community Edition. Otherwise, enter the product key that was emailed to you or that you can find on the bottom of your device.
The device will then start synchronizing the Bitcoin Blockchain! Depending on your device and network capacity, this process could take several days. The web interface of the myNode device will show you the current synchronization status. The device will automatically keep connected with the Bitcoin network and display the main application page once the initial sync is completed.
The primary myNode home page will appear once your myNode device is ready. If you are comfortable with Linux, you can connect to your myNode device through SSH. You can connect to the gadget using its IP address or hostname.
Use the default credentials as Username: admin and Password: bolt (it is recommended to change your password) to start using all the features myNode has to offer. The next step is to create a Lightning wallet on your myNode. Go to the main myNode page and click the “Lightning Wallet” button to create the wallet. After that, click “Create Wallet” to get a seed phrase.
This phrase is crucial, and anyone who knows it can access your money. Make a note of this sentence as a backup, and don’t tell anyone! After you’ve written down your seed phrase, click “Continue.” Re-enter your seed phrase on the next page to ensure your backup was generated correctly. To make your wallet, click “Create.”
If your phrase is correct, you will be redirected to the main Lightning page, where your Lightning wallet will begin syncing and setting itself up. The Lightning wallet should be ready in a few minutes, and you should see a page similar to this:
4. How To Operate A Profitable Lightning Node?
Lightning nodes search out the most efficient method for processing transactions. To be lucrative, you’ll need to set your own node’s charge low enough that you’re considered affordable by the network but high enough that it turned out to be one of the best ways to earn passive income with crypto.
Running a node is more like art than a science because special care and attention are required for each channel. When assessing fees, traffic flow, which channels to open and close, and rebalancing, you need to look at how traffic moves and how much it costs to move the traffic by focusing on a more macro view over time. So, how do you make passive income with nodes?
To feed the traffic, consider adjusting your channels. However, until traffic goes both ways, don’t keep a channel perfectly balanced. For example, if traffic travels in one direction, as it does on many channels, then sats must be constantly pushed or pulled back to feed the traffic.
In addition to the above, it’s a good time to look at routes during rebalancing. For example, you can see where things can be moved for a low cost, which is connected to whom, and where you can open a channel to one of the connecting nodes to reduce fees and increase routing potential.
Setting up a Tippin.me account to accept tips on social media via the Bitcoin Lightning Network is perhaps the most accessible and user-friendly way to make money with the Lightning Network. Additionally, you can earn a few sats every time someone transacts through your payment channel by supporting the rapidly growing Lightning Network.
The video creators may want to check Light Tube, a web-based platform similar to YouTube that allows users to publish videos in return for BTC via the Lightning Network. Users wishing to see a high-definition video must pay the required fee (usually 100 satoshis). On the other hand, uploaders can use LN payments to redeem the money they’ve earned from their videos.
But, how much does it cost to run a Lightning node? Remember that making money is not a motivator for running a LN, as Lightning node profit is usually a few pennies per month at best. On average, the gear necessary to run a node will cost between $200 and $400.
5. What Are The Various Lightning Network Problems?
Routing fees, channels being fraudulently closed, the exposure of nodes to online theft and malicious attacks are a few problems with the Lightning Network.
Routing fees are among the vital Lightning Network problems that are required to transfer payments between channels. However, nodes do not get any reward in return for facilitating payments. Also, fraudulent channel closure, which means one party closes the channel without notifying the other party, leading to offline transaction risk is another issue with the LN.
To transmit and receive payments on Bitcoin’s Lightning Network, nodes must always be online, making their private keys susceptible to hacks, thefts and scams. However, cold storage can help prevent the loss of keys and users’ funds.
Moreover, participants may be unable to retrieve their money back quickly enough if the payment channels become overloaded due to a malicious attack. Therefore, before investing in any projects, ensure that you conduct reasonable due diligence, such as assessing different blockchains and analyzing crypto tokens.
Bitcoin Lightning Network Developer Updates Node Software With Taproot Support
The latest software release, named lnd 0.15 beta (v0.15-beta), aims to empower developers to create solutions for more use cases by leveraging the Bitcoin Network’s capabilities.
Lightning Labs, a developer of the Bitcoin (BTC) Lightning Network (LN), released a beta version of the Lightning Network Daemon (lnd) — a complete implementation of the LN node — with added support to the latest protocol upgrades including Taproot and Musig2, among other improvements.
lnd is a software component that handles various aspects within the LN including managing a database, generating payment invoices and revoking payments, to name a few.
The latest software release, named lnd 0.15 beta (v0.15-beta), aims to empower developers to create solutions for more use cases by leveraging the Bitcoin network’s latest capabilities.
Announcing lnd 0.15 beta: To Taproot and Beyond! ♾️
Featuring: Taproot + Musig2 support for better privacy + efficiency, Taro soon™ ~95% database space reduction for new data ️ New pathfinding tool to choose speed vs. cost of payments
In the announcement, Lightning Labs’ product growth lead Michael Levin revealed that over 50 contributors participated in launching the company’s first release in the year 2022, adding that:
“This release gives complete Taproot support for the internal lnd wallet, making it one of the most advanced Taproot wallets today. Further, this release has support for an experimental Musig2 API compliant with the latest BIP draft.”
The primary goal of MuSig2, a multi-signature scheme, is to allow for the creation of aggregate public keys that can be used in Taproot outputs, thus, introducing the ability to authorize transactions with Schnorr signatures.
Unlike previous versions, the beta release also removes the redundant data from the revocation log bucket, which showed a reduction of 95% in database size during initial testing.
While the update does not reclaim space for existing states, Levin envisioned that a follow-up release may include a migration feature that could reclaim old disk space.
Staying true to their commitment to make the LN more reliable, robust, and secure, Lightning Labs introduced greater control over pathfinding preferences — ultimately helping to reduce the transaction fees by identifying the lowest cost route.
The Bitcoin network recorded the year 2022’s lowest power demand of 10.65 gigawatts (GW) on June 25. As a result, the computing power for mining BTC blocks came down to 199.225 exahash per second (EH/s).
The sudden reduction in Bitcoin’s power demand is directly correlated to the falling hash rate. The mining hash rate corresponds to the computing power required by BTC miners to successfully mine a block — a key security metric.
Busking On Bitcoin: How Lightning Network Outperforms Ethereum For Tipping
A busker in British Columbia got a lesson in the Lightning Network after a passerby offered to send some Bitcoin his way.
The Canadian band The Carbons got a little more than just a tip during a live performance in Kelowna, British Columbia.
When passerby Ben from BTCSessions, a Youtuber and Bitcoin (BTC) educator, saw that the band accepted Bitcoin, he had to send some magic internet money their way.
Tomy (frontman for The Carbons) had been into crypto since 2017, but like many people new to crypto, he thought he’d “missed the boat.” The price per BTC was around $2500. He told Cointelegraph that he began research in earnest when he:
“Realized that it was basically an insurance policy for the current monetary system. At that point, it was around $8000. It’s been a wild ride since then, but I am playing the long game :)”
Fast forward to his live performance in Kelowna this weekend, and Tomy advertised he accepted crypto as payment. Unfortunately, his phone was out of juice at the time that Ben walked by, so the pair linked up on Instagram later on.
As per the screenshots of the Instagram conversation, Tomy shared an Ethereum (ETH) address to receive a donation and become The Carbon’s first crypto donor.
Short story: saw a dude in Kelowna playing guitar with a sign asking for Bitcoin tips. His phone was dead but we linked up later online so I could tip. He offered an ETH address because he still thought bitcoin was slow/expensive.
As Ben is a Bitcoin maximalist, he said he’d be happy to send some Bitcoin—not Ethereum—his way. Ben told Cointelegraph that, among other things, it’s “The foundational rules that govern the network, and the ease (or lack thereof) with which they can be changed,” that guide his Bitcoin convictions.
Ben pointed Tomy towards downloading a Bitcoin Lightning wallet, and moments later, they were sending each other Bitcoin instantly over the Lightning Network (LN).
Transaction costs are nearly free on the LN and microtransactions are easy, which prompted Tomy’s response, “that’s fucking awesome.” By comparison, sending money over Ethereum—even at its lowest levels in two years—costs well over $1.
Tomy told Cointelegraph that it was his first experience using the LN, and it took “an hour of research on YouTube to decide on a wallet and then another few minutes to figure out how to use it.”
“I hadn’t heard about the Lightning Network until last week! It makes me want to trade all my Litecoin and ETH for Bitcoin!”
The Carbons have since received three BTC donations, adding that “all the tips help,” but it probably hasn’t moved the needle on their Spotify revenues just yet.
Bitcoin expert Ben told Cointelegraph that he’s been using the Lightning Network since 2018, back when it was “clunky and difficult, but it worked.”LN has since become a part of his daily routine:
Undoubtedly, LN is well-known to the Bitcoin community and has spread roots across the globe. From settling up lunch in the United Kingdom to sorting out SIM cards in Mozambique to paying for parties in Portland, United States, it’s gained traction.
However, awareness of the LN is weak among the crypto and broader community. Ben explains why this might be the case:
“There will be SOME who are incentivized to remain unaware because they are deeply invested into coins whose value is contingent on Bitcoin not being able to scale. However, most people likely just haven’t tried it!”
Ben encourages users to try out the LN, which he compares to “magic.” During the IG conversation with Tomy, he recommends using the Muun Wallet, a free self-custodial wallet for Android and iOS:
Just a little throwback here. I continue to really love @MuunWallet and its seamless singular balance, enabling to you send to on-chain and lightning without any additional hassles. Kudos.
As for Tomy, he told Cointelegraph he is now seriously considering selling all of his altcoins for Bitcoin. He then joked on Twitter that he might change the band’s name to “The Bitcoin Buskers.”
On a heartfelt note, and in light of the disastrous impact that the COVID-19 pandemic has had on performing arts, Tomy told Cointelegraph, “It’s been a tough couple years for musicians,” adding that the support and community are greatly appreciated.
Dollars On The Lightning Network: A Boon For Emerging Markets?
An innovation on the Bitcoin Lightning Network (LN) could shelter users from the price volatility of BTC by providing access to dollars.
Dollars at the click of a button on the Lightning Network could soon become a reality. An innovation from Galoy, the provider of open source core banking platforms such as the Bitcoin (BTC) Beach wallet, could provide safe haven from the volatility of BTC.
The innovation, called Stablesats, uses derivatives contracts to create a Bitcoin-backed synthetic dollar pegged to USD. The founder of Galoy, Nicolas Burtey, told Cointelegraph in an “explain like I’m five” kind of way that the wallet works as so:
“When we receive sats over Lightning, we convert it into dollars so that even if the price of Bitcoin changes, the user is not affected by the volatility.”
But why do we need dollars inside of a Lightning wallet— isn’t that what stablecoins are for? In effect, stablecoins such as USD Coin (USDC) and Tether (USDT) already provide the functionality of synthetic or digital dollars.
In a YouTube video, Burtey explains that “Lightning [Network] is the best payment protocol there is, so instead of using all these different payment protocols that stablecoins use,” it keeps users in one place in one app or wallet.
According to the website, “Stablesats only relies on the Bitcoin payment network to work.”
The idea was built upon a suggestion by Bitmex in 2015 t create a synthetic USD.
However, in a press release, Burtey suggests that the idea may have been before its time: there was no Lightning Network and no nation-state Bitcoin adoption.
As Bitcoin continues to make waves in emerging markets, price volatility is often brought into question. For example, the Bank of England chief argues that Bitcoin is too volatile for legal tender.
The ease with which users can now access dollars flies in the face of that argument. Speaking with Cointelegraph, Burtey summed up the situation:
“Because lightning is getting a lot of traction in developing countries, but this is also the place where people live paycheck to paycheck. So they can’t necessarily afford the volatility until they manage to have some savings.”
As Cointelegraph reports, U.S. dollar-pegged stablecoins are “viable alternatives” in emerging markets, and appetite for them swells in countries with high inflation and unstable regimes. The innovation on the Lightning Network provides users with another means of dollar-exposure.
Sebastien Verreault, the lead contributor to the Stablesats GitHub repository, explained that Dollar exposure is just a first step: “Ultimately, we can unlock the ability for every Lightning user to choose their own units of account without ever leaving the network.”
Galoy is behind the Bitcoin Beach Wallet in El Salvador, the Bitcoin Jungle App in Costa Rica and the Guatt Wallet in Panama, which is yet to be released. The Bitcoin Beach Wallet is the most popular wallet in El Zonte, the heart of Bitcoin adoption in El Salvador.
Central bankers from around the world tried out the Bitcoin Beach Wallet on a visit to El Salvador in May this year. According to Burtey, the team at Galoy is writing the dealer code for StacbleSats “so that it could more easily run by non-custodial wallet in the future.” The U.S. dollar on the Lightning Network could become a more permanent feature.
Move Over, Ethereum – Bitcoin’s Lightning Network Has Apps, Too
Bitcoin’s dominant scaling system continues to grow despite a formidable bear market.
While market analysts have been panicking about crypto winter, Bitcoin developers have been quietly building more apps. According to a report by Arcane Research, the Lightning Network in particular has developed a diverse ecosystem of over 100 apps across at least 20 categories.
Earlier this year, Lightning’s user base shot through the roof when Block (SQ) integrated Lightning into its popular Cash App, which has over 70 million users.
Just a few months before that, in September 2021, Bitcoin marketplace Paxful had integrated Lightning into its wallet and El Salvador’s government had launched the Lighting-compatible Chivo bitcoin (BTC) wallet.
Paxful has a user base of roughly 7 million and Chivo is used by 3 million to 4 million Salvadorans (although Chivo usage has noticeably dropped since the wallet’s launch).
Arcane Research suggests these three events catapulted the Lightning user base from a modest 100,000 users to over 80 million potential users in a matter of months.
It’s important to note that many of these potential users only have access to Lightning but don’t necessarily use it. Nevertheless, payment volume subsequently increased by 410% between the first quarter of 2021 and the first quarter of 2022.
As of this writing, the Lightning Network’s capacity – the total amount of bitcoin in the network – has reached an all-time high of 4,351 BTC, equivalent to almost $100 million.
The list of exchanges that have integrated Lightning is steadily growing, with Kraken, Okcoin and OKEx being the most recent additions. According to Bitcoin Visuals, the number of nodes at the end of July 2021 was around 13,391.
That figure has increased by roughly 27% to almost 17,000 nodes. (The actual node count will always be higher as there is a significant number of private nodes that are not included in public data.)
These increases in capacity, exchange integration and node count all point toward increased user adoption.
Battle Of The Layers
A recent tweet sparked a conversation about the number of apps being developed on top of Bitcoin and Lightning and how that compares with developer work on other chains.
How does Bitcoin compare with Ethereum and how does Lightning compare with Ethereum’s largest layer 2 scaling system Polygon? A previous CoinDesk article analyzed numbers from venture firm Electric Capital’s 2021 developer report. The report estimates that Bitcoin has less than 700 monthly active developers while Ethereum has over 4,000.
This is a huge difference, especially considering Bitcoin currently has a market capitalization of around $440 billion while Ethereum’s market capitalization sits at about $196 billion.
The difference in public ownership of the two cryptocurrencies is even greater. Crypto.com, a popular cryptocurrency exchange, puts the number of bitcoin owners at approximately 176 million and the number of ether (ETH) owners at roughly 23 million.
Similar disparities can be seen at the layer 2 level. Polygon claims to have 8,000 monthly active developer teams and 19,000 decentralized applications (dapps) running on its mainnet and testnet (Polygon’s live and testing environments, respectively). These numbers dwarf the 100 or so apps in the Lightning ecosystem.
Based on these metrics, one might erroneously conclude that Ethereum and Polygon are healthier ecosystems than Bitcoin and Lightning. However, a closer look reveals that a direct comparison may not be possible.
First, the Bitcoin blockchain was designed to make bitcoin (the cryptocurrency) its primary product. In fact, the Bitcoin and Lightning ecosystems are almost exclusively focused on money and payments.
Ethereum, on the other hand, was primarily designed to facilitate dapp creation. Therefore, it only makes sense to have more developers building apps on Ethereum than on Bitcoin.
Second, both Ethereum and Polygon are token-focused platforms. Initial coin offerings (ICO), decentralized finance (DeFi) and non-fungible tokens (NFT) are all products of the token economy.
Arcane Research suggests that token economies tend to attract more investors and developers. However, Arcane also highlighted the recent increase in Lightning-focused funding.
It will be interesting to see whether investor capital shifts towards Bitcoin and Lightning given the recent implosion of prominent DeFi platforms.
100 Flashes Of Lightning
Arcane Research created an infographic showing a vast collection of apps that have been built in the Lightning ecosystem.
Here Are Some Highlights From That Collection:
Lightning-enabled Bitcoin Wallets
Phoenix is a self-custody Lightning-enabled bitcoin wallet available to both Android and iOS users. ACINQ, the company behind Phoenix, is a French Bitcoin scaling firm that has been around since 2014.
Terminal helps Lightning node operators manage their nodes. Lightning infrastructure firm Lightning Labs, creators of Terminal, recently unveiled Autoloop – an enhancement that automates Terminal’s liquidity management functionality.
Liquidity on the Lightning Network refers to how easily bitcoin moves between network participants. To maximize liquidity, node operators will optimize their nodes differently based on each operator’s primary use case (e.g., sending vs. receiving payments). Autoloop automates this optimization process.
1/10: Loop helps node operators manage #bitcoin liquidity. Users told us that simple automatic Loops would help keep consistent inbound liquidity + control hot wallet size. Today’s launch of Autoloop on Terminal will help serve those needs.
Voltage, Greenlight and Bitnoder provide managed node operations. If a person or company wants to run a Bitcoin or Lightning node (or both), they can simply outsource that entire function to one of these firms for a fee.
Blockdaemon also provides node-as-a-service solutions but is not Bitcoin-exclusive.
Podcasts And Streaming
Fountain and Lightning.video pay content creators for their work. Fountain is a Lightning-powered podcasting platform that pays both hosts and listeners for performing value-adding activities.
Hosts get rewarded by listeners for creating quality podcasts while listeners get paid by hosts for listening to and sharing podcast episodes.
Lightning.video, for example, allows users to create video content behind “micro paywalls” – restricted access that can be unlocked by micropayments as low as a few satoshis (one satoshi = one hundred millionth of a bitcoin).
THNDR Games is a mobile app that offers bitcoin rewards to gamers. The app is available on both Android and iOS and features four games:
Desiree Dickerson, CEO of THNDR Games, describes her mission as “gamifying the world with bitcoin.”
Newcomers: Lightning-enabled browser extensions
Developers are adding new apps to the Lightning ecosystem regularly. For instance, Alby is a recently launched browser extension that enables in-browser Lightning payments. It’s like Bitcoin’s version of MetaMask – a widely used, browser-based Ethereum wallet.
More than 2000 people have now installed Alby’s browser extension.
Bitcoin Lightning Network vs Visa And Mastercard: How Do They Stack Up?
Bitcoin’s Lightning Network has been growing at a slow pace. What’s keeping it behind, given its high transaction throughput?
Bitcoin (BTC) changed the world as a decentralized, nongovernmental form of currency that can facilitate peer-to-peer (P2P) transactions that transcend national borders.
But despite this functionality, Bitcoin’s role as a payment mechanism has been called into question due to its low transaction throughput.
The Bitcoin blockchain can handle up to seven transactions per second, which means that network demand has seen the average transaction fee on the network reach an all-time high above $62 during specific periods.
In order to address low throughput and high transaction fees, developers made the Lightning Network — a layer-2 scaling solution that allows for off-chain transactions.
The Lightning Network creates a P2P payment channel between two parties in a transaction. The channel “allows them to send an unlimited amount of transactions that are nearly instant as well as inexpensive. It acts as its own little ledger for users to pay for even smaller goods and services such as coffee without affecting the Bitcoin network.”
Users of the network lock in a certain amount of Bitcoin in order to create a channel. Once the BTC is locked, recipients can invoice amounts as they need.
To a certain extent, the network is seen as a solution to Bitcoin’s scalability problem, but its adoption has been somewhat slow. The network currently has 87,000 payment channels and 4,570 BTC locked in, worth over $111 million, compared to the 19.1 million BTC in circulation, the market capitalization of which is over $460 billion.
Despite its slow adoption, the network has the potential to outcompete existing payment solutions.
Lightning Network’s Transaction Throughput
Payments giants like Visa and Mastercard are used to process payments worldwide. Mastercard’s network is estimated to process up to 5,000 transactions per second, making it far superior to Bitcoin’s seven per second.
Visa’s transaction throughput is even more impressive, being able to process up to 24,000 transactions per second. In a recent interview, Visa chief financial officer Vasant Prabhu said that the network could, in theory, handle up to 65,000 transactions per second.
The Lightning Network goes much further, however, processing up to 1 million transactions per second, making it the most efficient payment system in the world in terms of transaction throughput.
Speaking to Cointelegraph, Ovidiu Chirodea, CEO of Romanian cryptocurrency exchange Coinzix, noted that the network marks the next phase in the evolution of money.
Per Chirodea, first, there was gold, which was a store of value but wasn’t a convenient medium of exchange, with fiat currency following up as a convenient medium of exchange.
Bitcoin, Chirodea said, was an evolutionary step that created a new store of value, with the Lightning Network serving as a platform for it to also become a medium of exchange:
“Visa is charging businesses around 3% to process payments, so I think the Lighting Network is a game changer. Companies will increase their revenue by using it, and that’s not something that you can ignore.”
He noted, however, that the network’s scalability “isn’t so great,” as users need to open a channel with each party and tie up BTC on it, which affects their liquidity. Per his words, tying up liquidity can be avoided by “using other routes and other payment channels,” but the solution “isn’t very scalable, as payments channels keep opening and closing.”
Thomas Perfumo, head of business operations and strategy at crypto exchange Kraken, told Cointelegraph that since the firm launched Lightning Network support in April 2022, it has “steadily increased network capacity” to the point that it’s now the fifth-largest node on the Lightning Network:
“We currently have over 800 open channels that can facilitate upward of 18 billion satoshis worth of payments. Clients are routinely funding their accounts via the Lightning Network on a daily basis.”
Perfumo added that the exchange sees the Lightning Network as “essential for the creation of a permissionless payment system that will ultimately help accelerate the adoption of cryptocurrencies worldwide.”
While the Lightning Network’s advantages in terms of transaction throughput are now clear, it has some notable downsides.
Firstly, opening up a Lightning wallet and funding it may not be as easy or as ingrained as opening a bank account and using a debit card.
Furthermore, funding a Lightning Network wallet requires users to send BTC from a traditional Bitcoin wallet, and creating a payment channel involves locking up funds.
Once funds are locked into a payment channel, they can freely transact, but the funds can only be recovered after that channel is closed.
Moreover, offline transaction scams are possible, as one party may close a channel when the other is offline to try to steal funds. While third-party services may mitigate the risk, it keeps some from entering the network.
Privacy, Ease Of Use And Censorship-Resistance
Keeping these disadvantages in mind, Max Rothman, head of crypto and digital assets at global payment processor Checkout.com, told Cointelegraph that being able to use cryptocurrencies to exchange goods and services “is only effective when crypto can seamlessly exchange hands.”
The Lightning Network being peer-to-peer, Rothman added, puts the responsibility for the transactions process on both merchants and customers. On an institutional level, “This can be challenging and resource-intensive to administer in-house without a trusted partner to manage thousands or millions of cross-currency transactions.”
Rothman said that solutions like the one used by Checkout.com, which rely on partner companies like Visa to offer on-ramps that allow for crypto-to-fiat conversions, are that “bridge that offers a more seamless translation experience between Web2 and Web3.”
Onboarding the next million or billion people to crypto “requires guidance, support and bespoke solutions that work for every level of payment needs and acknowledge the current payments environment in which we operate,” he stated.
Speaking to Cointelegraph, Bruce Fenton, a board member at the Bitcoin Foundation and a candidate for the United States Senate in New Hampshire, said the Lightning Network “enables Bitcoin to do more transactions” while being “more decentralized and censorship-resistant than centralized companies or most other chains.”
When asked about the pros and cons of using the Lightning Network over solutions from companies like Visa, Fenton dismissed Visa as “entirely centralized,” which means it can “be stopped or censored.” While centralization may be a concern on the Lightning Network for some, he said that it does not affect the Bitcoin blockchain itself and added:
“It’s mostly about what money you are building on and for. For those who believe in Bitcoin as the superior money, LN is the most well-known scaling solution.”
Chad Barraford, technical lead at decentralized liquidity protocol THORChain, told Cointelegraph that when checking out at online stores, the Lightning Network enables a “cash” option, in which “there is no other party participating, no exorbitant fees and substantial privacy benefits.”
He said that the network is “not solely motivated by the best interests of shareholders or board members” but serves its participants’ interests as a public good, adding:
“Visa is a financial institution that inherently seeks profit and control and is at the behest of governments. The Lightning Network is purely a public good. It only exists to provide a fundamental and critical service for every person on the planet in need of access to financial services.”
The Lightning Network’s adoption and success are “tightly coupled with the Bitcoin network itself,” Barraford stated. He believes that as the world sees BTC less as a speculative asset and more “like a currency to purchase items,” then inflationary pressures “will push more and more people to the Lightning Network.”
While the comparison against networks like that of Visa or Mastercard is clear from these answers, it’s worth pointing out that some of these arguments apply to other solutions such as PayPal, which can be forced to freeze customers’ assets or charge higher fees, for example.
Blockchain technology has been developing over time to the point that other blockchains are also able to compete with Visa’s transaction throughput without seeking to profit from it.
What About Other Chains?
Speaking to Cointelegraph, Fenton hinted that the Lightning Network stands out as “more decentralized and censorship-resistant” than most other blockchains.
Decred co-founder and project lead Jake Yocom-Piatt built on that idea, telling Cointelegraph that other blockchains are unable to match the Lightning Network’s qualities.
Yocom-Piatt claimed that the high-throughput blockchain Solana, with a theoretical throughput of 710,000 transactions per second, is a “centralized, noncustodial blockchain that requires its validating nodes run in datacenters on high-end hardware.” Comparing the Lightning Network, Solana and Decred itself, he said:
“Of these three, Lightning Network is the most decentralized, sovereign and most aligned with the original ethos of the cryptocurrency space. Solana sacrifices most of its decentralization via its onerous validating node requirements, but at least it does not appear to be able to censor users and merchants arbitrarily.”
Whatever the future holds, it’s clear that innovation in the cryptocurrency space is increasing transaction throughput. Whether users will end up choosing to sacrifice privacy and immutability for more convenience remains to be seen.
As it stands, more convenient solutions are available. It’s now easier to use layer-1 blockchains for payments via centralized entities that allow crypto assets to be converted to fiat currencies at the point of sale.
For the Lightning Network to gain a wider audience, more services are likely going to have to support it. Leading exchanges like Coinbase, Binance and FTX haven’t followed the footsteps of other exchanges in embracing the network, hindering its growth.
As the network relies on having more payment channels to keep routing transactions, other networks and centralized payment providers are likely to stay ahead.
Lightning Labs Releases Software To Allow Bitcoin Developers To Mint And Transfer Assets On The Blockchain
The alpha version of Taro will make it possible to create peer-to-peer Bitcoin and Lightning-native stablecoins.
Lightning Network infrastructure firm Lightning Labs has released a test version of the Taro daemon, a new piece of software that will allow Bitcoin developers to create, send and receive assets on the Bitcoin blockchain.
Taro is a Taproot-powered protocol that was introduced in April and that allows bitcoiners to issue assets such as stablecoins on the Bitcoin blockchain. Those assets can then be transferred over the Lightning Network for instant, high-volume and low-fee transactions.
According to Lightning Labs, Bitcoin, Lightning and now, Taro, will make it possible to create peer-to-peer Bitcoin and Lightning-native stablecoins that settle instantly, with low transaction fees and no financial intermediaries.
“With Taro and the incredible developer community, we can build a world where users have [U.S. dollar]-denominated balances and BTC-denominated balances (or other assets) in the same wallet, trivially sending value across the Lightning Network just as they do today,” Lightning Labs wrote in its announcement on Wednesday.
“Bitcoinize The Dollar With The Lightning Network,” Proposes Elizabeth Stark
* The Director Of Lightning Labs Highlighted The Foundation And Ecosystem Around Lightning.
* “Lightning Can Be A Global Monetary Language” For Sending Digital Money, Said Miles Suter.
Elizabet Stark, CEO of Lightning Labs, referred to one of the potential uses that the Bitcoin Lightning network could have in the future. In this sense, she said that she imagines a “bitcoinization of the dollar” to be able to send cryptocurrencies and fiat system assets “using the stability and security of the Bitcoin and Lightning network.”
The businesswoman and developer spoke at the Bitcoin 2023 conference, which takes place in Miami, Florida, United States.
Also participating in the panel called “Building Lightning-native companies” were Miles Suter, software engineer and development leader in Bitcoin in Cash App, and David Marcus, former director of Paypal and now CEO of Lightspark. The moderator was Mackenzie Sigalos, a reporter for CNBC.
One of the first topics to be covered was the current state of the Lightning Network. Starke said in this regard that “Lightning has reached a point of maturity, with larger transactions, more adoption and a level of success in operations greater than that of credit cards.”
Nevertheless, stressed that development on this second layer of the Bitcoin network continues, while “solving real problems”. “We are building things that no one has built before,” he highlighted in his address, “and that is very exciting.”
The director of Lightning Labs, one of the first companies to develop around the Lightning network back in 2016, highlighted as positive the fact that there is “an entire ecosystem” around the network. “We have the foundations, the tracks for the train to run,” he added, to illustrate all the development potential that lies ahead for the industry.
For his part, Suter stressed the importance of Lightning in the current situation of the Bitcoin mainnet, congested and with high fees. One of the things to improve, the Cash App representative noted, is to make Lightning “something much simpler.”
David Marcus, meanwhile, assured that “there can be no better advertising” than having launched Lightspark, a platform for payments with Lightning, precisely in these circumstances.
The Potential And Future Of The Lightning Network
About the future of the Lightning network, Miles Suter emphasized interaction with the world of fiat money. “Our mission at CashApp is economic empowerment. For that, we might need a mix between today’s currencies, like the dollar, and a tomorrow’s currency, like bitcoin (BTC).”
He also assured that “Lightning can be a global monetary language” for sending digital money over the network that is interoperable with fiat money, he said.
When talking about this particular topic, Stark referred to the launch of the new version of Taproot Assets (formerly Taro) by his company.
As recently reported in CriptoNoticias, it is a protocol for the issuance of Bitcoin assets, something similar to what currently happens with BRC-20 tokens, but more efficiently and with less demand for network resources. “The intention is similar to what Miles mentions, to achieve fiat operations through Bitcoin and the Lightning network.”
The proposal would be “like bitcoinizing the dollar, using the stability and security of the Bitcoin network to issue stablecoins and transact with the scalability and low fees of Lightning,” Stark said. “Users wouldn’t even need to know how Lightning works or what liquidity is,” he added, aware that “it’s a journey and we’re constantly evolving.”
In the last place, Marcus said that since the beginning of 2020 he had the idea of enabling transactions with the Lightning network through WhatsApp or Telegram.. “But it was too soon,” she said. “We tried another approach and failed,” he added, referring to Libra (or Diem), until at the end of 2021 he decided to go all-in on Bitcoin.
“I am going to spend the rest of my life developing in Lightning; the only network capable of allowing decentralized payments is Bitcoin, no other”, he assured.
After several years at Facebook and Paypal, Marcus brought his experience to the development of Bitcoin and the Lightning network. Source: Bitcoin Magazine / YouTube.
On the focus that Lightning should have in the coming years, he opined that, instead of focusing on the person who wants to pay for a coffee and can already do it without problems with a card, we should focus on other things that cannot be done “by the old methods” that still exist.
For example, sending money in real time over the internet to a content creator, “although there are hundreds of use cases that are not possible with current methods.”
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