How does it feel to hold the famous bitcoin lightning torch? Diana Aguilar explains.
An experimental service that allows users to pay for futures data from exchanges Kraken and BitMEX via the lightning network is now live.
Promising to be electrifying and covering for the rapidly expanding Bitcoin, Lightning Network is the nearest alternative for scaling the underlying. At the time of press and perhaps triggered by expanding Bitcoin prices and increasing number of BTC accepting merchants, the LN network capacity is up 54 percent processing a massive $4,259,141.07 or roughly 1057 BTCs. As the capacity grows, the number of channels follow suit and are up 18 percent to 7,381. But why is Lightning Network gaining so much traction roughly a year after launch?
Segwit Laid the Foundation
For once, we must understand that Bitcoin as a network is limited by block size. Back in Q3 and Q4 2017, several solutions were proposed and in a bid to deal with a bloated network, the community agreed to soft fork the network through a user activated upgrade in Segregated Witness (Segwit). It was Segwit that laid the foundation for LN as it ran a code separating transaction signature from data thereby freeing up space allowing for more transactions to fit in a block. Supporters estimated that Segwit would quadruple the nominal capacity of the network.
Apart from implementing this space freeing code, Segwit also dealt with the malleability bug that would have directly impeded the activation and launching of LN, a layer two and controversial layer two solution that would increase the network’s throughput. Since the business community disagreed to activate and double block size to 2MB contrary to NY and Hong Kong Agreements, the only solution that would scale the network was Lightning Network.
Here’s Why Lightning Network is Popular
Lightning Network introduces a smart contract that runs on top of the Bitcoin network allowing IOUs. Through this code, a peer can only one payment channel and connect with other peers he/she transacts with. Similarly, each peer will have one connection to the underlying blockchain network. Connected peers can transact as they want, execute private payments but once the channel is closed or funds in this LN supporting wallet are exhausted, everything is settled on the Bitcoin blockchain. Because of this arrangement, payments are processed faster, costs reduced and the throughput increased by several factors.
In fact, according to the official Lightning Network description, the creation of private channels scales the underlying by “millions to billions of transactions per second “ meaning it can outperform traditional financial intermediaries like Visa (which can process 2,000 transactions per second) and other centralized network by several magnitudes. Add this to the efficiency and lack of intermediation costs that parties paid, the network becomes this audit free, secure and cheap payment processing juggernaut.
There are weaknesses associated with the LN but the promise of making small transactions in a scalable manner is what is enticing. Already, Jack Dorsey is a supporter and through Tippin.me, users can “tip” users posting quality content or breaking news in Twitter. That’s not all. According to Mainnet lightning Network Stores, more merchants are embracing the future. Through Lightning Pizza, you can order Pizza from Dominos and pay with Bitcoin via the LN.
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HadePay now features Bitfury’s Lightning Peach API, allowing merchants to accept Lightning Network transactions.
Bitcoin (BTC) mining and development company Bitfury has entered into a partnership with United States payments processor startup HadePay to allow its merchants to accept Lightning Network (LN) transactions. The news was announced in a blog post from Bitfury’s on March 14.
HadePay implemented Bitfury’s Lightning Peach API to facilitate LN payments, which are significantly faster and cheaper than conventional Bitcoin transactions.
The startup worked with Bitfury’s Lightning Peach team, a dedicated spin-off group of engineers focused on Lightning Network promotion.
As a payments gateway, HadePay already lets clients accept crypto and fiat currencies as well as payments via various services, such as PayPal and Square.
“HadePay’s wide network will now be able to accept bitcoin knowing that the transaction will go through almost immediately,” Lightning Peach head Pavel Prikhodko commented in the blog post, adding:
“The Lightning Network is an essential tool for efficient cryptocurrency payments, and we’re thrilled to be bringing it that much closer to worldwide adoption.”
As Cointelegraph reported, the technology is seeing heightened publicity in 2019, mostly due to the ongoing Lightning Torch transaction relay experiment.
Passed between network participants, the Torch has seen ownership from figures including Twitter CEO Jack Dorsey, who subsequently pledged to implement LN payments on both Twitter and payments platform Square.
Tron (TRX) CEO Holds Optimistic Tone On Crypto
Justin Sun, the chief executive of Tron, recently sat down with CNBC’s “First On” segment to discuss his expectations for the cryptocurrency industry moving forward. The Chinese crypto-centric entrepreneur drew attention to a number of reasons why investors should be bullish on assets like Bitcoin (BTC) and TRX.
First on the chopping block, the growth of the Lightning Network. Over the course of the past months, the scaling solution has been openly endorsed by players like Jack Dorsey from Twitter & Square, along with Reid Hoffman from LinkedIn, Blockstream, and Microsoft, leading to a surge in the adoption of the Bitcoin protocol. Many believe that Lightning’s recent uptick will precede adoption in the mainstream, as brick and mortar outlets and payment applications purportedly look to integrate near-instant, effectively free, secure, and uncensorable BTC payments.
Second, Sun draws attention to the fact that JP Morgan and Facebook all intend to launch their own digital assets could be a positive factor. This comes just after Tom Lee of Fundstrat made a similar comment, explaining that such ventures will be integral in pushing cryptocurrencies past having only 10 million or so active users. While some would bash FB Coin as entirely centralized and fallible, Ari Paul from BlockTower Capital once argued that even if 10% of its users “stumble across Bitcoin,” the asset would have been a net benefit on the decentralized cryptocurrency ecosystem.
Elon Musk Endorsing Bitcoin Has Justin Enthused
When asked about his thoughts on Warren Buffett’s skepticism of cryptocurrencies, a question issued likely in reference to the Oracle’s “Bitcoin is a delusion” comment, Sun kept his head high. The former Ripple Labs marketer explained that while the American investor is wary of digital assets, both Dorsey and Elon Musk have endorsed Bitcoin is some way, shape, or form.
As explained earlier, Dorsey has lauded the Lightning Network, expressing love to integrations of the advancement and even publicly accepting a BTC transaction through the system.
Elon Musk, on the other hand, has a bit more quiet on his Bitcoin love, but has still be explicit nonetheless. Per previous reports from Ethereum World News, the fervent Tesla and SpaceX leader told ARK Invest’s CEO that he expects for cryptocurrencies to eventually replace banknotes. Specifically touching on Bitcoin, he said that he likes the premise, but is somewhat wary of the energy it needs to keep on running.
BitTorrent Integration Could Be Monumental For Adoption
Closing off his segment, the industry chief executive draws attention to BitTorrent, which has been owned and integrated into Tron’s facets for those who missed the memo. He explains that the fact the file sharing service, centered around peer-to-peer values, has been ‘tokenized’ and ‘blockchainified’ should be key in driving adoption. In an interview at Token2049, Sun tells me that BitTorrent’s blockchain facet could single-handedly bring 100 million users to the cryptocurrency space.
Photo by Kent Pilcher on Unsplash
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Bitfury Group has partnered with business payments processor HadePay to bring lightning network-based bitcoin payments to merchants.
An experiment pushing the boundaries of crypto payments, bitcoin’s Lightning Torch is suffering liquidity issues due to its success.
Adoption of Bitcoin payments by Kroger and Starbucks may be tipping point for crypto.
Yet, despite that blinkered skepticism, cryptocurrency payments actually grew last year. Payment processor BitPay reported a “record” $1 billion in transaction revenue in 2018, with its business-to-business (B2B) operations increasing by 255 percent compared to the previous year. Meanwhile, the use of cryptocurrencies in such economically unstable countries as Venezuela and India has surged, as people turn to the likes of Bitcoin and Dash to escape from increasingly worthless national currencies.
These are all encouraging developments, and they’ve become more encouraging in recent months, with growing interest in crypto payments from major retailers. From Kroger to Starbucks and Rakuten, big corporate names have begun flirting with Bitcoin and the Lightning Network as a payment channel, as well as with other cryptocurrencies. Their interest comes amid rising disenchantment with legacy payment systems, stoking hopes that a few more big converts to crypto payments could provide an all-important tipping point toward widespread adoption.
However, while events appear to be moving in the right direction for crypto payments, experts agree that it will take more than a few isolated use cases before the industry will see adoption on a larger scale. Added to this, payment interfaces need to be improved and made more consumer-friendly. It’s only with the combination of technological effectiveness and corporate adoption that the global public will begin using crypto as money.
Kroger struck by lightning?
At the beginning of March, supermarkets giant Kroger — the 17th-largest company in the United States — revealed that it would stop accepting Visa credit cards at over 250 of its stores. “Visa has been misusing its position and charging retailers excessive fees for a long time,” said Kroger executive VP Mike Schlotman in a statement, with the retailing giant also explaining that Visa’s fees were the highest of any of the credit cards it accepted.
What’s interesting about this episode is that members of the crypto community quickly swooped in to make the case for Kroger to accept Lightning Network payments. On Twitter, Morgan Creek Digital founder Anthony “Pomp” Pompliano reached out on March 2 to the retailer’s leadership team, stating that the “Morgan Creek Digital team will fly to meet them and get them hooked up with the Lightning Network nationwide.” Even more interesting, Pomp followed this up on March 3 with a tweet announcing that he had just “finished up first call with someone on Kroger Digital team,” and that his followers should “stay tuned” for more updates.
It’s hard to say just how far Kroger will run with Pompliano’s offer, yet industry figures are more or less unanimous in their views that adoption of Bitcoin payments by a giant like Kroger would be a watershed moment for the industry.
“Adoption of Lightning Network by a major retailer would definitely be a big deal for the entire crypto space,” says Vilius Semenas, the chief commercial officer at crypto-payment processor CoinGate. “For bitcoin, exposure to real consumers on such a scale could only do good and pave the way toward another level of adoption.”
According to Semenas, there’s certainly an appetite among major retailers for a new payment network to replace legacy systems. “The card payments industry is unique in that Visa and MasterCard control the lion’s share of the consumer base,” he told Cointelegraph. “At the same time, innovation adoption in this space takes a long time because the market is two-sided and needs adoption from both consumers and retailers. Retailers are naturally frustrated, because they have little-to-no ability to affect card payments, and they would probably turn to alternative payment rails if they could.”
CoinGate isn’t the only crypto-payment processor who suspects that such retailers as Kroger would prefer to move to more efficient and cost-effective payment systems. BitPay’s director of product, Sean Rolland, also told Cointelegraph much the same thing, even if he suspects that it will be a long time before existing systems are replaced by crypto-based alternatives. “No business enjoys high fees,” he said. “Legacy payment systems are not going completely away anytime soon, but retailers should always be evaluating better solutions.”
Starbucks, Rakuten, Birks Group dip their toes
Aside from Kroger, there are signs that other big players are entertaining the idea of moving to the Lightning Network and crypto payments. Most notably, Starbucks will begin accepting Bitcoin payments at its U.S. outlets by the end of 2019, according to industry rumors. This acceptance comes as part of an equity deal with Bakkt, a cryptocurrency exchange and payments platform being launched later this year by Intercontinental Exchange (ICE), the operator of the New York Stock Exchange (NYSE).
Back in August, the coffee giant was revealed as one of Bakkt’s key partners, alongside Microsoft and consultancy BCG. According to the press release announcing Bakkt and its partnerships, Starbucks would not only be working with Bakkt to create its platform, but it would also be using the platform to accept crypto payments. In other words, even though the latest reports regarding Starbucks’ imminent acceptance of Bitcoin payments are unconfirmed, the company itself had already confirmed that it will be doing this sooner or later, as explained in August by its VP of partnerships and payments, Maria Smith.
“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks,” Smith said on the occasion of Bakkt’s announcement. “As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”
This is precisely the arrangement that’s now rumored to be launching toward the end of the year. Reports indicate Starbucks will accept Bitcoin payments at its American outlets, but it will immediately convert these to fiat, as indicated by its initial press release from August. So even though the exact launch date hasn’t been confirmed, this will prove a massive boost to Bitcoin and crypto payments, and it’s hard to imagine that other big companies won’t follow Starbucks’ lead.
Right now, there are no firm signs that other retailers as big as Starbucks or Kroger will begin accepting crypto payments anytime soon. However, there are a steady supply of slightly less high-profile companies (less high-profile in the U.S., at least) that have begun accepting such payments, or which will do so soon.
In November, Birks Group — one of Canada’s largest and oldest jewellery retailers — announced that it had begun accepting Bitcoin at eight of its 30 stores in Canada. And in January and February, it became increasingly likely that Rakuten — Japan‘s largest e-commerce website — would begin accepting crypto, after it established a new payments subsidiary and announced an update to its Rakuten Pay app that would feature support for cryptocurrency payments.
You can still count such companies on one or two hands. However, given their size and clout, their movements into crypto payments are likely to put greater pressure on their rivals to act similarly. As BitPay’s Rolland affirms, “The more retailers that accept bitcoin, the better.”
The path has hurdles
Despite this early movement in the direction of crypto payments, there are still a number of significant obstacles in the way of widespread adoption. Perhaps most difficult of all, there’s the chicken and the egg problem: How can big companies adopt crypto payments if not enough consumers hold and use crypto, and how can most consumers come to hold and use crypto if not enough big companies adopt crypto payments?
Acknowledging that many retailers are looking for new payment channels, CoinGate’s Vilius Semenas nonetheless warns they’re not likely to adopt any channel that doesn’t already boast a critical mass of users. “The problem is that there isn’t a payment system adopted widely enough by consumers,” he said. “And it is virtually impossible to get consumers to effectively switch to another payment form other than cash.”
This is arguably why there aren’t more retailers like Kroger, Starbucks and Rakuten, since only around 5 percent of Americans own at least one kind of cryptocurrency. It’s also why it might be unwise to get too excited about Kroger or Starbucks providing a “tipping point” for crypto payments, since without mass ownership of cryptocurrencies, other companies aren’t likely to be swayed too much by the examples these pioneers set. Again, this is a point made by Semenas, who notes that other instances of adoption haven’t resulted (at least, not yet) in waves of copycat behavior:
“Whether this could become a ‘tipping point’ leading to a cascade of other merchants starting to accept bitcoin is uncertain. A few months ago, Ohio adopted bitcoin payments for taxes, for example. But it didn’t lead to other states doing the same yet. It would likely depend on the results of the experiment.”
There’s also the issue that systems like Lightning Network aren’t quite ready yet for large-scale deployment. Lightning Network is currently in beta, so the idea that Kroger will drop such processors as Visa in favor of Bitcoin still remains a little fanciful. And as Vilius Semenas notes, many crypto-based payment channels like Lightning Network currently lack the kind of simple-to-use, streamlined interface that would lend them to massive consumer adoption:
“In an ideal world, for a retailer like Kroger, Lightning Network would be the perfect solution to accept consumer payments in a secure, cost-efficient way. Actually, it might be even the only solution that would enable worldwide payments on a scale that Visa and MasterCard currently provide. The major barriers to this would be consumer-friendly technology and convenient interfaces to transact money at the point of sale, rather than capacity constraints of the Lightning Network technology itself.”
These words of caution aside, Semenas nonetheless believes that “it is most probably just a matter of time for user-friendly applications to get developed.” And given that Lightning Network was conceived as recently as 2016 and launched in beta only last March, it has already come a long way. There’s no reason to think that it, Bitcoin and other cryptocurrencies won’t go even further in the future.
Lightning Bitcoin Is Centralized Like Visa: Critic
Since the Lightning Network has come to life, the scaling solution has been lauded as a way to fix many of Bitcoin’s current problems in terms of transaction speeds and fees. But, in a recent Twitter rant, Erik Finman, a Bitcoin millionaire who invested in the cryptocurrency when it was under $10 and presumably sold it in the thousands, bashed Lightning.
He explains that Lightning effectively turns Bitcoin into “Visa and Mastercard” — two organizations that Satoshi seemingly wanted to circumvent. Finman adds that BTC with Lightning is put into the hands of Silicon Valley, rather than miners, node operators, and the like. The investor explains that while Lightning isn’t as centralized as the Federal Reserve at “100%,” the introduction of the protocol could introduce risks to the once “12,000,000%” decentralized Bitcoin.
While Finman is sure that Lightning is much like a rehashed version of Visa, put onto a blockchain, a number of prominent Bitcoiners have still endorsed the second-layer protocol as a way to accurately calm scalability qualms.
Lightning Boomless Nonetheless
Jack Dorsey, for instance, recently revealed that he intends to add the popular second-layer protocol to Square’s facets, presumably to bolster the merchant adoption of Bitcoin.
Dorsey is far from the only industry insider and Silicon Valley mainstay to have lauded the Lightning Network. Reid Hoffman, the co-founder of LinkedIn and a board member of Microsoft, Blockstream, among some of the world’s biggest startups, accepted a public Lightning transaction just weeks ago.
The monumental development of the Lightning ecosystem, through projects, like Lightning Pizza & Tippin.me, and initiatives, like the Trust Chain, have led some to conclude that Bitcoin could surmount Visa over time.
Alec Ziupsnys, better known as “RhythmTrader” on Twitter, noted that the advent of the Lightning Network will force them, Mastercard, Visa, and the like, “to bend the knee.”Some have even gone as far as to say that eventually, the aggregate value of all BTC in existence will surpass the market capitalization of Visa’s shares. Anthony “Pomp” Pompliano, the founder of Morgan Creek Digital, took to his personal publication to outline why such an occurrence could come to fruition.
He claimed that “given the fast growth rate and historical premiums” of promising upstarts and networks, the cryptocurrency could begin to make a move on Visa’s and Mastercard’s valuations. Pomp wrote:
“Today, it is 1/4th the market cap of Mastercard and 1/6th of Visa, but it wouldn’t surprise me if Bitcoin surpasses both within the next 36 months. The legacy networks were built for a world that we no longer live in and the decentralized network is built for the future.”
BTC Is Dead, Along With Litecoin (LTC)
Finman’s recent comment on the veracity of the argument that Lightning is decentralized and viable comes after he claimed that Bitcoin is dead to MarketWatch. Per previous reports from Ethereum World News, the millionaire first told the business outlet that putting too many eggs in one basket, namely cryptocurrencies, could produce dismal results.
He then flat-out said that t “Bitcoin is dead,” adding that the fragmented nature of the crypto community, could spell the end for the asset… eventually. He went on to bash Litecoin (LTC), explaining that the project has been “quite dead for a while,” likening the recently-booming cryptocurrency to a star about to go kaput.
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You’re not sure where it will end up exactly or who will actually read it. But you type up a message, pay a couple of cents in bitcoin and click the “send” button. Your message zips through space – yes, space – then is broadcast out of a satellite, blanketing the world. The result? A […]