OKCoin plans to integrate Lightning Network payments later this quarter. Those who use the Bitcoin layer two scaling solution to deposit at the US-based cryptocurrency exchange will benefit from faster transaction times and lower fees.
OKCoin joins a handful of other exchange platforms offering Lightning Network payments. A recent uptick in Bitcoin transaction costs may continue to accelerate adoption.
OKCoin Embraces Layer 2 Solutions
OKCoin will become one of the first US-based exchanges to integrate layer two solutions. It revealed plans to launch Lightning in the coming weeks via a blog post on Friday.
The Lightning Network is an effort to scale the Bitcoin network by alleviating the demand for block space on the main chain. Payments occur on a layer above the Bitcoin blockchain, eventually settling on the main chain.
We’re proud to announce that OKCoin will integrate the @lightning network allowing for near instant withdrawls and reducing bitcoin network fees from ~$10 to pennies. https://t.co/FHt5EkWOMZ #bitcoin #btc $btc
— OKCoin (@OKCoin) January 22, 2021
Lightning transactions don’t require confirmation by Bitcoin miners. Therefore, transactions don’t consume higher fees, allowing for micropayments.
OKCoin anticipates Lightning transaction fees as low as around $0.01. At the time of writing, the Bitcoin base chains’ average transaction fee is more than $13. Similarly, the exchange states that deposits and withdrawals will take just seconds compared to sometimes hourly confirmations.
When demand for block space is low, base chain transactions typically require between ten minutes and an hour, depending on the number of confirmations required. This can increase significantly when the network is busy.
Lightning integration will also allow OKCoin to reduce its minimum deposit and withdrawal limits. Previously, the minimum accepted payment was 0.001 BTC (~$35).
The exchange will drop this to just 100 satoshis (0.000001 BTC). At the current bitcoin price, the minimum deposit/withdrawal will be around $0.04. CEO of OKCoin, Hong Fang, described the reasoning behind the integration:
“As part of our analysis of the technology, we assessed the strength and quality of the nodes and now feel the network is strong enough to participate as an exchange with a high volume of withdrawals and deposits a day.”
He added that he hoped other companies would adopt the Lightning Network. If widely used by customers on numerous exchanges, main chain transaction fees would drop, too, increasing the Bitcoin blockchain’s utility.
Rising Fees Encouraging Lightning Adoption
A general upwards trend in the bitcoin price that started last March is increasing demand for block space. Data from BitInfoCharts shows that the average transaction fee has been growing.
The average fee for a main chain transaction peaked at around $17 on Jan. 12. It has since fallen to just above $13, still considerably more than the $0.05 to $1 average fees reported in early 2020.
OKCoin is the latest in a growing list of exchanges to integrate the Lightning Network. Besides other lesser-known trading venues, Bitfinex, Kraken, and CoinCorner have all added or announced support plans.
Although Lightning integration has clear benefits, exchanges have historically been slow to adopt Bitcoin upgrades. Binance, for example, only integrated deposits to SegWit addresses at the end of 2020, and data from on-chain analyst Willy Woo shows that less than half of transactions use the block space-saving format.
Yet, Lightning Network is growing. BitcoinVisuals shows that there are now almost 8,500 connected nodes with Lightning payment channels, compared with less than 5,000 this time last year.
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