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Why Bitcoin Lightning Network Is the Key to Crypto Adoption?
Bitcoin was introduced to the world of finance as a new form of money that operates without intermediaries. The concept was accepted widely, but with time, there came a restriction in the form of scaling issues. This limits the real-world usage of this digital currency.
Transaction fees rose high, and the transfer speed slowed as more and more people started adopting it. Due to this, the Bitcoin utility for everyday payments was hampered, and scalability concerns were raised.
The idea of the lightning network, which moves transactions off-chain through the payment channels network, emerged. In this blog, we will see Bitcoin’s limitations and whether “Lightning” is the actual future of money.
Six confirmations are recommended for the final approval of the on-chain transaction. All of these steps will take a lot of time, but one can quickly analyze the issues as speed is of significant concern, and there are a large number of these transactions every day.
“The average time taken for a Bitcoin transaction to be mined and added to the Blockchain is 11.4 Minutes.”
Another issue is the regressive fee structure, which is impractical for smaller transactions. For instance, if we buy a candy, then the fee applied to it is more than the price of the product itself, and till the time the transaction gets settled, the candy has been eaten away too.
“The average fee at the time of writing this article is $3.”
This portrays that scalability was sacrificed to make the payments decentralized and secured.
The person who introduced the lightning network frames it as a second layer of activity that solves the issues of speed and convenience. It does not change the way Bitcoin works, nor does it change its decentralized nature or security.
If you transact with a vendor, a channel is created between you and the receiver. It acts like a pre-funded tab where you can send back and forth with a minimum fee. Whenever you settle or cash out the remaining funds, the LN network sends an on-chain transaction to communicate with the main blockchain with an average confirmation time and fee.
Hence, Lightning vastly simplifies the process. It uses hubs to route the transaction and minimize the directly connected channels. This makes the overall payment system more scalable, and the funds get settled in a few seconds or minutes.
Lightning or LN holds the power to enable Bitcoin to be a proper medium of exchange. Although its growth has been quiet, the community is paying close attention to its adoption, channels, and users.
“On 7 September 2021, El Salvador became the first country to make Bitcoin a legal tender.”
“It is predicted that El-Salvador could become the biggest base of lightning network users.”
Bitcoin on Lightning is the future of money because of its growth rate. At the time we wrote this article, there were almost 16,500 nodes on the LN network and around 60,000 channels, with a locked liquidity of $59 million and an average capacity of $1,000 per channel.
Compared to the Visa network, it is pretty small, but the rational growth of LN is appreciative. Bitcoin can only process 2 to 7 transactions per second, and in theory, lightning networks’ potential is to process thousands or hundreds of thousands of transfers instantly. This can be the most valuable finance asset in the future and will act as a great use case for micropayment transactions.
“There were only 10,000 channels on the mainnet in 2018, which means a 6X increase in 6 years.”
The network’s effect has truly shown in every coming year. Despite that, the features of the lightning network play an important role in making it money in the future.
The features that bifurcate the Lightning and make it the future successor of Bitcoin are explained in detail as follows,
Since the Lightning Network was introduced, it has aimed to be built on something that would allow Bitcoin’s power to grow and be usable in daily life. Now is the time for small and large businesses to accept it in reality and hope for a more advanced future.
E-commerce stores can now embed payments online from customers worldwide. This not only maximizes conversion and reduces the chances of fraudulent transactions but also connects the world to explore various e-commerce channels and mediums.
Integration with an advanced Bitcoin payment processor like Speed allows you to integrate the Bitcoin payment services in your online store with a seamless checkout process. The e-commerce utility is gaining worldwide growth with the implication of the Bitcoin lightning network.
Previously, making offline payments with Bitcoin was intricate at stores and restaurants. However, LN has paved the way for a perfect solution that provides a seamless experience to your customers. Use LN payments at brick-and-mortar stores with a no-code payment setup.
The virtual identity of the businesses will be created, and a virtual address will be assigned. In this way, accessibility will be enhanced while accepting payments at your offline store. This use case will help in quick payments without waiting in lines.
Gaming has revolutionized the industry, and from a person’s home, it has made its way to organizations. Multiple international websites accept Bitcoin as their primary mode of payment. Bitcoin allows streamers to collect payments and also helps in making in-game purchases.
The gaming industry will continue to evolve, and lightning networks will help increase revenue, improve retention, and generate timely session reminders.
The problem faced by NGOs in the current market is attaining a more extensive audience globally, and they are not able to move forward in this. Bitcoin on Lightning is making it easier for them. LN provides a global platform for donations and instant settlements.
Bitcoin payment processors allow the NGOs to integrate with them and get all the donations via the LN network. The instant payments and payout options are plentiful with updated status.
LN, or lightning network, is a much-required technology to strengthen the already existing blockchain. The launch of LN has brought about the best financial decisions of the digital age. It keeps all transactions private and accessible to the decentralized network. From speed to cost to scalability, it brings a conversation about peer-to-peer electronic cash and improving global finance.
With all the features Bitcoin on Lightning holds, it can truly be concluded as the future of money.
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