A proper business owner will always look for ways to level up his or her business, whether that be thinking of new products, clever services, or even accepting new and innovative ways of payment like Bitcoin (BTC).
A few years ago, accepting BTC as payment for your goods and services was a great way for you to put your business on the map. However, with more and more people accepting Bitcoin, you’ll need to look a little deeper. For some, that means using the Bitcoin Lightning Network.
What is it and how does it work?
It’s a high probability that you’ve already heard of Bitcoin — the price surges and dips that led headlines on the news have made sure of that. However, you’re probably thinking: what is the Bitcoin Lightning Network?
To fully understand the Lightning Network and what it can do for your business, you first have to understand the scalability issue of Bitcoin. As it became more popular, more people got into the Bitcoin space looking at it as a means of investment, remittance, boosting efficiency or even wealth preservation. As a result, the Bitcoin network gets congested when many people are trying to transact at the same time.
This led to many people believing that Bitcoin had a massive scalability issue. In turn, a lot of people were turned off. With this issue in mind, developers began to look for solutions. Enter: the Bitcoin Lightning Network.
Basically, the Lightning Network is a Layer-2 solution, meaning that it’s built on top of the main Bitcoin blockchain. It has its own nodes that communicate with the main blockchain through mini-ledgers called channels.
Let’s say that you want to use this network to transact with your friend Peter. Before any transactions happen, you’ll both need to fund a channel. For this example, let’s say that you both put in 1 BTC each, totaling 2 BTC for the channel. As soon as it’s funded, the channel will be created and at that point, you’ll be able to send as many transactions to each other as you want, so long as the total value of the transaction doesn’t exceed the amount used to fund it.
In a scenario where you want to pay Peter 0.5 BTC, you can send that almost instantaneously with low fees. At that point, you’d have 0.5 BTC in your balance while Peter has 1.5 BTC. You can continue to keep making transactions, and when you’re finished, the channel will be closed and published onto the main blockchain where it can be added to the ledger of all transactions.
The real-use cases of the Lightning Network
Think of the Lightning Network as your own personal highway for BTC transactions. It has faster speeds and lower costs, meaning more efficient transactions. The main Bitcoin blockchain is then freed up to focus on larger transactions, for which higher fees are somewhat more understandable.
This is what makes the Lightning Network more ideal for:
– Remittances?: On its own, Bitcoin has already revolutionized the world of remittances. With the power of the Lightning Network, these remittances can be even cheaper and faster.
– Businesses: ?With the Lightning Network, businesses have a more efficient payment model for their goods and services. Lightning-quick BTC transactions at lower costs, who wouldn’t want that?
– Microtransactions in general?: Overall, the Lightning Network improves upon microtransactions — which weren’t as efficient in Bitcoin as most people wanted it to be. The lower costs and faster speeds, in general, are better for smaller BTC transactions.
All you need to do is buy Bitcoin to load up your wallet, and you’re ready to go.
Popular businesses that use the Bitcoin Lightning Network
As larger companies begin to see the value the Lightning Network, it’s likely that we’ll see more of them adopting it.
Cryptocurrency marketplaces, such as Paxful, have already begun to integrate the Lightning Network into their digital wallets so that Bitcoin isn’t just seen as a means of investment but rather as real money that can be used in the world.
Another example is McDonald’s in El Salvador, which has begun to accept payments through the Bitcoin Lightning Network with the help of OpenNode. Now, all the hungry BTC users in El Salvador can pay for their Big Mac and fries within seconds at reduced fees.
Those two are just the tip of the iceberg. With Bitcoin now being legal tender in El Salvador, we’ll probably see more businesses integrate the Lightning Network into their systems.
Pipe dreams turned into reality
A few years ago, implementing the Lightning Network on a large scale was something that Bitcoin enthusiasts could only dream about. Fast forward to years later, and we’re seeing the beginning of something that could be very special for the space.
If this isn’t proof that BTC is constantly evolving its way into global adoption, we don’t know what is.
This content is sponsored by Paxful.
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