Ever since being proposed in 2015 by Joseph Poon and Thaddeus Dryja, the Lightning Network has helped reduce the Bitcoin scalability problem. The idea of faster transactions per second and fewer fees has led to a steady increase in the adoption of the Lightning Network. According to DappRadar, over $110 million in Bitcoin has been locked to the network to date.
When the Bitcoin network is congested, the approving and storing of transactions becomes expensive and slow, and that’s where the Lightning Network comes in. It provides another layer on top of the Bitcoin network that gives it the ability to process bitcoin transactions off-chain. The transactions are then later updated to the Bitcoin network in one transaction rather than many.
Many individual payments between different parties can be made in seconds at next to no cost and the interconnection between the parties making the payments is what is called the Lightning Network.
Payment Apps Helping Drive Adoption
The increase in adoption of the Lightning Network is highly influenced by the presence of payment apps. These are projects which make it possible for users to leverage the benefits of the network without needing technical expertise. Each of these applications offers instantaneous and inexpensive transfers all from a mobile phone. Here are some of those apps:
- Cash App
Cash App recently announced the adoption of Lightning Network payments on its platform. Its users can buy tacos, tip on Twitter, or send money abroad just by scanning lightning QR codes with their cameras.
The stock and cryptocurrency exchange announced a few weeks ago that they would now allow the platform’s over 20 million users the ability to make Bitcoin transactions faster and with zero fees using the Lightning Network.
Chivo is a Bitcoin wallet built and launched by the El Salvador government. To meet the needs of the El Salvadorans who recently adopted Bitcoin as a legal tender, Chivo was used to airdrop $30 worth of bitcoin to each citizen. It can now be used to make payments in bitcoin and convert BTC into USD and vice versa.
Block is the parent company of Square, Cash App, and Spiral, three financial services and payment platforms founded by Jack Dorsey. When Jack left the CEO position at Twitter, he decided to dedicate his time and attention to bitcoin through the integration of the lightning network into these payment companies.
Exchanges Lagging Behind in Lightning Integration
A couple of popular exchanges like FTX, Coinbase, and Binance have not integrated the lightning network on their platforms. There are a number of reasons that could be the reason for this. Firstly, the offer of fast and free bitcoin transfers can challenge the profitability of some exchanges and in some instances be against their business model. These exchanges charge a fee to withdraw bitcoin that is often larger than what is required to send the bitcoin. Integrating the lightning network would undermine this flow of income.
On another note, a Redditor gave a suggestion about the possible reason why some popular companies have not fully integrated the network. He claims that the Lightning Network is still very young as it also needs a lot of work to integrate, so companies still want to see it get more adoption before they invest heavily.
So as the adoption of the Lightning Network has been growing steadily over the past few years, we can only hope that more exchanges would enable their users to benefit from the fast and cost-free transfer of Bitcoin in the coming years.
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