The decision is aimed at offering users a quicker and more affordable network for Bitcoin (BTC) transactions. With the Lightning Network, users can engage with Bitcoin (BTC) through a faster interface. According to Coinbase CEO Brian Armstrong, the Lightning Network is a crucial asset in the crypto industry, and integrating it will enable users to experience faster transactions.
What is the Lightning Network?
The Lightning Network is a layer-2 solution on the Bitcoin blockchain. Layer-2 solutions are essential for scalability in blockchains. Among layer-2 solutions, the Lightning Network is crucial because of its association with Bitcoin and its ability to add utility value to the chain.
Bitcoin was created as a peer-to-peer electronic cash system, meaning users could transfer value without intermediaries. However, scalability and transaction throughputs were not initially prioritized. Over time, this became a problem known as the blockchain trilemma, where finding the right balance between decentralization, scalability, and security was challenging.
Bitcoin is now the most decentralized and secure blockchain, but it faces scalability issues. Transactions on the Bitcoin network can take anywhere from two minutes to several hours to complete.
This issue has become more significant with the emergence of new blockchains like Ethereum and Solana, which offer better transaction throughput. Ethereum can handle 30 transactions per second (TPS), while Solana can handle up to 65,000 TPS. As a result, Bitcoin and Ethereum have had to rely on layer-2 solutions for scalability.
Improved transaction throughputs are crucial for chains that aim to have a healthy application ecosystem, as low transaction speed and high costs can negatively impact user experience on decentralized finance (DeFi) applications.
For Bitcoin, the Lightning Network is the most important layer-2 chain. It provides four important features, which will be discussed in this article.
The Lightning Network, launched in 2018, has gained popularity and has been adopted in different regions. In June, it reached a capacity of 4,000 Bitcoin, with Gibraltar, the Isle of Man, and El Salvador being noteworthy adopters.
The Lightning Network has experienced significant growth with the recent acceptance of Bitcoin as a legal tender in El Salvador. However, it has also faced criticism from certain Bitcoin influencers who argue it is a failure due to limited usage.