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The giant loyalty has published an optimistic report on the Lightning Network, this network to perform bitcoin transactions immediately and almost free.
What is Lightning Network?
It is a secondary network connected to a bitcoin network that increases transactions and confidentiality of payments.
The Lightning network compensates for slowness and sometimes significant “transactions” costs. We speak in Žargon “Layers 1” and “Layer 2. Layer 1 is a bitcoin blockchain, while layer 2 is Lightning Network.
The Bitcoin network is designed to generate a transaction block every 10 minutes. Each block can weigh up to 4 MB, about 3,000 transactions. It is small, but for the purpose. It would be very easy to increase the size of the blocks, but for the victim of decentralization.
The possibility of enlargement of the blocks has long been discussed and led to Fork BCH (bitcoin cash) in 2017. Without success, because BCH is now 0.3 % BTC. The market thought that unlimited blockchain challenges decentralization.
Decentralization is based on the existence of many nodes that are the backbone of the bitcoin network. They verify transactions and ensure that the protocol is respected for a letter, especially the limit of 21 million BTC.
However, the number of nodes is directly proportional to their costs, which depends on the memory necessary to store blockchain (currently 630 GB). Increasing the size of the blocks would increase these costs and destroy decentralization without which bitcoin would have nothing.
Developers like Thaddeus Dryja have proposed Lightning Network, where transactions negligible at negligible costs will record a fraction of a second. All without jeopardizing the basic properties of bitcoins (decentralization).
Coffee payment with Lightning Network:
Some key characters
The Lightning network was launched in 2017 to face fans of large blocks who eventually created a BCH with a hard fork.
Since then, thousands of cryptocurrencies have been launched by claiming that they settled the “problem” of the low flow of bitcoin transactions. This is obviously nothing. Security was preferred and an increase in transactions taken from Lightning Network.
As already mentioned, its growth remains modest. The reason is that Bitcoin is primarily perceived as a reserve of value. It is really better to spend your euro or dollars first than your bitcoins. Not to mention the capital revenue tax (which could soon disappear in the United States).
In addition, be aware that the use of LN requires a transaction to be carried out to the transfer of bitcoins to the Wallet specially dedicated to the Lightning network (French Phoenix, Breez, Zeus, etc.). So do not hesitate to make significant recharges that you will pay at a significant cost of a bitcoin network.
Once this first transaction is made, the transaction becomes immediate and almost free. The Fidelity Report reports an average of 0.02 % for transactions between EUR 100 and 1000. It is 0.24 % for transactions between 1 and 10 euros.
“A transaction exceeding one million satoshis (~ ~ € €) between 0.39 and $ 1.27. This fresh/transaction ratio is rare in the traditional sector »We can read.
The transaction speed also has nothing to do with the bitcoin network. Voltage data shows that payments of less than 1000 euros are made in less than a second.
It is best to come
The voltage data shows an increase of almost 200 % of payments between 2023 and 2024. It is 2,400 % since 2022. Encouraging, but LN payments remain a decrease in the ocean of global transactions via visa, card, etc.
Note that exchange platforms such as Coinbase and Kraken have implemented them to reduce the cost of taking bitcoins with their customers. The decentralized social network NOST also uses LN so its users can send tips in the form of “ZP”. According to the report in the last six months they have sent more than 3.6 million.
LN growth could also come from banks currently using the SWIFT network and more third parties that significantly slow international transfers (compensation chamber, correspond to banks, etc.). Not to mention the cost.
LN could become an immediate and final international settlement technology between banks. Especially if Bitcoin stands out as an international reserve currency …
The report also emphasizes another interesting aspect of the Lightning Network: “Taproot Assets” protocol. Taproot assets expand the functionality of LN above the simple transmission of bitcoins. Allows you to convert any type of tokenized assets. For example, stablecoins, gold or corporate bonds, etc.
“As a result, we plan to grow in Lightning Network, despite the perception of bitcoins as a reserve of value that discourages its expenditure”closes loyalty.
Surprisingly, Lightning Network. It will certainly take off when the capital profits are canceled around the world …
We will end the hammer that no cryptocurrency can boast cheaper transactions than with Lightning Network. Our article on the subject: Bitcoin: And in the end there will be only one.
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Renunciation
The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.
