On Thursday, the software that’s meant to make cryptocurrency transactions cheaper and faster went live. This software is called Lightning Network and it is now ready to be used for Bitcoin payments after thousands of developers tested it over a year.
Lightning Labs, one of the companies developing the software, released this initial version. Also, it is compatible with networks that other groups such as Acinq and Blockstream are developing.
Although Bitcoin has become a type of digital gold to many, it faces difficulties to fulfill its original purpose to become digital money. Transaction fees have climbed to as high as $50, while confirmation times can take as long as a week at their peak. Crypto enthusiasts believe that the Lightning Network can solve these problems with fees at a fraction of a cent and really fast transactions.
The Lightning Network let Bitcoin users open transaction channels between each other. Then, the parties can conduct payments without having to post them to the Bitcoin blockchain. This way, they avoid costs and delays that result from the recording of those transactions each time. When the channel closes, only the resulting balances are recorded on the Bitcoin blockchain, not the full channels’ transaction history, and only then the Bitcoin fees are paid. There is no transaction limit or time required for closing a payment channel, so they can possibly remain open for months or even years.
Lightning Labs chief executive officer and founder, Elizabeth Stark states that currently, the Lightning Network is able to process transactions in the low thousands per second. This rate is still far from Visa Inc.’s maximum of 56,000, but it is also an improvement on five transactions per second of Bitcoin. The technology was released in January 2017, and since then over 4,000 payment channels have been opened. Even though it was in testing phase, some merchants already started to use it.
Who will use the Lightning Network?
According to Stark, merchants and online businesses will be the most likely users because it facilitates a high volume of payments along with minimum fees that allow for micropayments. Crypto exchanges could also benefit from the software to accelerate withdrawal and deposit of funds. Further, Stark claimed that merchants and Bitcoin enthusiasts are excited about the software and it feels like we are on the edge of mass cryptocurrency adoption.