Amid all the controversies, hype and contentious debates around Bitcoin, it’s sometimes forgotten what its key purpose was originally intended to be. Neither a vehicle for speculation nor a place to park your wealth if gold just won’t cut it, Bitcoin was intended to enable peer-to-peer decentralized transactions. Or in other words, it’s supposed to be used as money, while cutting out the middlemen.
In the world imagined by Bitcoin maximalists (who eschew other cryptocurrencies, adamant that Bitcoin will consume all competition, both cryptographic and traditional), all your transactions can be finalized on-chain, from picking up a coffee to buying a house. And in fact, this isn’t quite as far-fetched as it might sound, as in El Salvador, BTC has been legal tender since 2021, and can be used for daily transactions.
However, an obvious obstacle to this kind of adoption (even if it is only partial, and runs parallel to existing, more familiar payment methods), is the problem of scaling. Put simply, the Bitcoin network isn’t configured to handle this volume of throughput, takes time to process transactions, and would struggle to deal with billions of micro-transactions, for coffee or anything else, on a constant basis. And, this is where the Lightning Network steps in.
What Is Lightning Network?
The Lightning Network, which first went into operation in 2018, is a second layer operating on top of the Bitcoin network. It takes transactions off the main blockchain, allowing channels to be opened between users, through which transactions can take place at speed and cheaply. When users are finished with their interactions and a channel is closed, all the transactions that have been made are then settled back on the main Bitcoin blockchain.
The result of this is simple but critical: instant payments, and Bitcoin as a usable method of everyday transactions, just as it was intended to become.
Xapo and Lightspark
This month, Xapo Bank, working in partnership with Lightning Network infrastructure builder Lightspark, integrated Lightning Network into its services, bringing two advantages. Firstly, customers can now pay for purchases up to a value of $100 directly in BTC, at merchants that themselves utilize Lightning Network.
Secondly, this development represents a meaningful step in altering the perception of Bitcoin, from a digital product that is exotic and on the fringes, to an asset with utility that links up with daily life. Xapo Bank, based…
