Few people use Bitcoin to pay for everyday items as the vast majority of retailers do not accept Bitcoin as payment, but that is changing, according to Morgan Stanley in a research paper released Thursday.
- The bank mentioned that payments startup Strike just announced a deal with point-of-sale provider NCR and payments business Blackhawk Network, which suggests that Bitcoin would soon be accepted in a huge number of US retailers and restaurants.
- The Lighting Network will be used to handle transactions in Strike’s proposed payment system, according to the company.
- Partnerships with physical retailers, according to Morgan Stanley, are a more significant milestone in the “development of Bitcoin adoption as a medium of payment,” as over 85 percent of sales in the United States occur in stores rather than online.
When you use the Lightning Network to send Bitcoin, the fee to do so is almost zero.
According to the bank, this makes Bitcoin and the Lightning Network more convenient for making smaller payments that would ordinarily be done using a debit card.
Because of the historical volatility of goods priced in Bitcoin, the use has been discouraged.
However, the ability of merchants to accept Bitcoin, whether through cards or existing payment terminals, may result in a decrease in volatility in the digital asset, according to the bank.
It is important to note that the prices of goods have and continue to go down over time when priced in Bitcoin.
What is the Lightning Network?
Bitcoin changed the way the world pays by granting you the ability to control your money without the involvement of governments or banks.
On the other hand, its transaction processing limitations have long been considered a drawback.
A solution to this problem is provided by the Bitcoin Lightning Network, which allows users to make hundreds of thousands of low-cost transactions every second.
In Bitcoin, the Lightning Network is a supplementary layer that enables users to build payment channels that allow transactions to take place away from the main blockchain while still benefiting from the network’s inherent security and decentralization.
Off-chain transactions are what they are referred to as.
The second layer improves the speed, reduces costs, and increases scalability of the whole Bitcoin network.
How Does the Lightning Network Operate?
The Lightning Network uses smart contracts to construct off-chain payment channels.
Paylines exist on top or outside the main blockchain. You and your neighborhood café may set up a payment channel for your regular coffee and scone. Once the payment channel is available, you can make payments indefinitely.
- Instantaneous transactions at a fraction of the cost of the main blockchain. Your payment channel has its own ledger separate from the Bitcoin network. Each party might choose to close or renew.
- When the two parties opt to stop the payment channel, all transactions are combined and posted to the main blockchain ledger.
- Consolidating smaller transactions allows for faster validation of bigger transactions.
- Without payment channels, your coffee and scone transactions would bog down the Bitcoin network for everyone.
Lightning Network History
- 2013: Mike Hearn, a Bitcoin developer, presents Satoshi Nakamoto’s explanation of payment channels.
- 2015: Joseph Poon and Thaddeus Dryja publish their article “The Bitcoin Lightning Network,” in which they explain an off-chain payment system constructed with payment channels, which is published in the journal Science.
- 2016: Lightning Labs is established. The firm is committed to furthering the development of the Lightning Network.
- 2018: Lightning Labs delivers a beta version of their Lightning implementation. In addition to Square founder Jack Dorsey, Lightning Labs has received $2.5 million in early investment from a number of renowned investors.
- 2022: BitPay will allow Lightning Network payments…
The Lightning Network Today
If you missed it, be sure to check out the Strike and Jack Mallers announcement and presentation from the Bitcoin Conference in Miami.
Mallers breaks down the lack of innovation in the industry and how Bitcoin and the Lightning Network are the innovation, as well as the major retailers that will be integrating the LIghtning Network into their point of sale systems.
Medium 15 mins.