What is Bitcoin Lightning?
Scalability has been a concern for Bitcoin as it processes just around seven transactions per second. When Bitcoin exploded in popularity, transactions took a long time to process with higher transaction fees incurred. Experts in the financial industry deemed that Bitcoin wasn’t able to host the global economy, compared to the 24,000 to 50,000 transactions per second handled by Visa.
For bitcoin, when the demand to use the network exceeds 7 transactions, users experience long wait times and fees as high as $60 per transaction at the extreme. Even with fees recently hovering between $1–2, the network remains unsuitable for buying that proverbial cup of coffee (thus the need for lightning).
The Lightning Network, which allowed for the processing of at least 1 million transactions per second, was launched in 2018 to address the concerns about Bitcoin’s scalability.
Lightning is a decentralised network in the blockchain that enables instant payments across a network of participants, peer-to-peer. A “second layer” protocol is added to the existing Bitcoin blockchain, allowing the users to create payment channels between any two parties on that extra layer. These channels can exist for as long as required, and because they’re set up between two people, transactions will be almost instant and fees will be extremely low or even non-existent.
Adoption of Lightning Network
Earlier this year in 2022, Lightning’s user base shot through the roof when Block (SQ) integrated Lightning into its popular Cash App, which has over 70 million users.
Just a few months before that, in September 2021, Bitcoin marketplace Paxful had integrated Lightning into its wallet and El Salvador’s government had launched the Lighting-compatible Chivo bitcoin (BTC) wallet. Paxful has a user base of roughly 7 million and Chivo is used by 3 million to 4 million Salvadorans (although Chivo usage has noticeably dropped since the wallet’s launch).
Arcane Research suggests these three events catapulted the Lightning user base from a modest 100,000 users to over 80 million potential users in a matter of months. It’s important to note that many of these potential users only have access to Lightning but don’t necessarily use it. Nevertheless, payment volume subsequently increased by 410% between the first quarter of 2021 and the first quarter of 2022.
The list of exchanges that have integrated Lightning is steadily growing, with Kraken, Okcoin and OKEx being the most recent additions. According to Bitcoin Visuals, the number of nodes at the end of July 2021 was around 13,391. That figure has increased by roughly 27% to almost 17,000 nodes.
As of August 7, 2022 the Lightning Network’s capacity – the total amount of bitcoin in the network – has reached an all-time high of 4,351 BTC, equivalent to almost $100 million. (CoinDesk)
How does it impact your business?
The Lightning Network significantly reduces the time and fees required to send and receive Bitcoin. Businesses do not have to worry about block confirmation time, and you are guaranteed payment speed of milliseconds to seconds. (Coindesk)
Furthermore, it facilitates secure and anti-double spending transactions before they get recorded on the Bitcoin blockchain. (Coindesk).
The Lightning Network enables merchants to process cost-efficient low-value bitcoin transactions. The average transaction on the network is typically less than 20 USD. Bitcoin can now be used as a form of payment in your shops, cafes, bars, e-commerce retail stores, and more.
By accepting payments in Bitcoin on the lightning network, you get to save transaction costs and enjoy shorter settlement periods.
A TripleA Client Case Study: Digicel
Digicel is a mobile phone network provider operating in 32 markets across the Caribbean, Central America & Pacific regions. As a total communications and entertainment provider, Digicel powers even the most remote communities with mobile coverage.
They deliver solutions to deliver fast broadband speeds and the best quality home entertainment over their state-of-the-art fibre network, to enable their customers to connect over great experiences.
Since the Bitcoin rollout in September 2021, almost half of the El Salvador population has set up a Bitcoin account. The country is also home to the world’s third-largest crypto ATM network with more than 200 ATMs nationwide.
The citizens of El Salvador have been actively using the government-issued Chivo cryptocurrency wallet and can utilise their Bitcoin for necessities such as hospital bills, rent, food, and even school fees. Chivo Wallet was designed to operate with Bitcoin Lightning, a second layer to the blockchain network, that allows instant transactions and low network fees making it the ideal cryptocurrency for small value payments.
Digicel aims to deliver the best network, the best service, and the best value to their customers. When El Salvador made Bitcoin legal tender, Digicel wanted to be at the forefront and provide the best user experience for their customers in El Salvador, to make payments using Bitcoin.
Solution: Lightning Bitcoin
Transactions on the bitcoin network are slower and more expensive for users. By partnering with TripleA, and supporting Bitcoin transactions on the lightning network, Digicel allowed their customers to pay them with Bitcoin, in a timely and cost-effective manner.
Digicel customers in El Salvador can now conveniently pay mobile top-ups on the MyDigicel App using their Chivo Wallet.
As a result, Digicel enjoyed a new customer base from El Salvador, lower transaction fees as compared to traditional payment methods and faster settlement periods.
Digicel’s partnership with TripleA’s user-friendly, wallet-agnostic crypto payment solution supports their mission of delivering the best network, the best service, and the best value to their customers.