titled “The Lightning Network: Turning Bitcoin into Cash”a study conducted by the Central Bank of Cleveland shows how LN facilitates bitcoin transactions while removing a large load from the mainnet.
“We found a significant association between LN adoption and blockchain congestion reduction. Suggesting that LN helped improve the efficiency of Bitcoin as a means of payment,” writes the Cleveland Fed.
Introduced in 2016, Lightning Network it began to gain traction in the following years, especially because of its low cost and instant confirmations, making it a great tool for microtransactions like paying for a cup of coffee.
Proving its security over the years, more companies have begun to adopt this technology and it seems only a matter of time before LN becomes an industry standard. Today the network has more than 4,200 BTC of capacity, growing monthly.
Central Bank of the United States explains how the Lightning Network works
According to the Central Bank, the Lightning Network is a step forward for Bitcoin in terms of money. In addition to allowing instant and cheap transactions, it also helps make the network more efficient.
With LN, users can perform as many transactions as they want, needing to register only two onchains, one in and one out, improving the network even for those who don’t use Lightning.
“In principle, doing this only requires two transactions on the blockchain, one to open the channel and one to close it, regardless of the amount settled or the number of underlying payments.”.
In other words, LN manages to be perfect for microtransactions, leaving the main network only for high-value transactions, which require more security. As a result, less data is stored for eternity, reducing the size of the blockchain, an issue that has led to forks in the past.
Bitcoin will only be money with the Lightning Network
With 1 MB blocks, mined every ~10 minutes, it’s hard to imagine that the Bitcoin network could serve as the foundation for a large economy. In addition to the long waiting time, making it impossible to use it in common transactions, we would also see absurd commissions, as has happened in the past.
Therefore, the Central Bank study shows that the Lightning Network plays an important role in converting Bitcoin into cash, without relying on third parties.
Although it is already being used even by The Savior, LN still needs to see further adoption in the industry. However, this seems to be only a matter of time, as more companies adopt this solution every day.