The Bitcoin lightning network has stolen the spotlight in 2018 and isn’t showing any signs of stopping. The growth of the network had not slowed down a bit as even more development around the technology is being revealed.
Bitfury Group, a well-established company in the blockchain space, has revealed its successful collaboration with BTCBIT on bringing lightning payments to exchanges.
The implementation was accomplished by Lightning Peach, which is a software development team within the Bitfury Group. The collaboration was done with a Polish cryptocurrency exchange BTCBIT, which also offers fiat-to-cryptocurrency trading.
A Big Step Forward
While this might sound underwhelming, this is actually a huge step forward for the lightning network.
The exponential growth of the scaling network was one of the highlights of 2018. The lightning layer is one of the solutions to Bitcoin’s scaling bottleneck and, since launch almost one year ago, has expanded to over 5,000 nodes, 20,000 channels, and over 500 bitcoins in capacity.
Crypto enthusiasts are lauding the progress made in less than a year. However, the network is still in its infancy with a lot of the capacity being concentrated in the hands of a few big node operators. Nevertheless, products that offer easy-to-deploy lightning nodes have been blooming over the past year and should contribute to wider adoption of the technology.
In order to advance to the next phase of adoption, the main challenge for Lightning is to facilitate payments for merchants and users. This is actually the purpose of the layer — to enable Bitcoin payments for day-to-day purchases. The joint effort by Lightning Peach and BTCBIT is a great example of an intermediate step towards that purpose.
By enabling lightning payments with an exchange, the user is able to enjoy much faster transaction times and lower transaction fees. Most cryptocurrency investors that have interacted with exchanges will know that deposits and withdrawals are relatively fast but can still take up to a couple of hours — and fees remain relatively high for Bitcoin (BTC).
The lightning network on an exchange works by opening a direct channel between the platform and the user. All transactions are settled almost immediately between the two and, only after the payment channel is closed, all of the transactions are recorded onto the Bitcoin blockchain. As such, any user could enjoy the speed of hundreds of transactions in a fraction of time at the lowest fees.
Now that deploying a lightning node is relatively easy even for less tech-savvy users, this could be a great opportunity for exchanges to improve their operational activity. At the same time, this could spur demand for lightning node products as users will get the bonus of transacting much faster at a lower cost than with the exchange platforms.
[bctt tweet=”Lightning on exchanges could see users keep their Bitcoin in their wallets!” username=”beincrypto”]
This would be a terrific boost to the user experience on cryptocurrency exchanges. Not only that, but such a development could see users keep their digital assets on their own address and interact with the exchange only when needed. The exchanges wouldn’t lose any of their business, but the risk of a single point of failure is eliminated.
While this is an encouraging sign for the lightning network, it still has to prove it can keep its momentum in the coming year and can aid in the wide adoption of Bitcoin.
What do you think? Can lightning payment channels with exchanges lead to such a development? Would exchanges oppose the idea of users’ funds not being in their hands? Tell us in the comments below!
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